Reign of Fear

The House recently passed a cap-and-trade bill to attempt to limit climate change, and it may actually represent the beginning of the end of the environmentalist's efforts to restructure society using climate change as the purported rationale.

The bill, if it became law, would be an unmitigated disaster. Not only would it impose massive tax increases by raising the price of energy, it would reduce industrial activity and use of products Americans clearly want to use, such as cars and air conditioning.

Even worse, the bill as written could lead to a economic depression, since it includes a provision to impose trade sanctions against nations who don't impose similar restrictions on their own economies. When China and India and other nations don't follow our example and instead impose counter sanctions against our exports, because they seek economic growth rather than indulging their left-wing elites' preoccupation with purported rising temperatures, the global economy would suffer.

But the good news is the bill will have a tough time becoming law. The House vote was by a slim 219-211 margin, and required eight Republicans to go along with the bill to ensure passage. More tellingly, 44 Democrats voted against it; Obama came out against the bill's trade sanctions (and if that is stripped out, then union support will go away); and passage in the Senate is considered less likely.

Most importantly, passage comes at a time when the supposed consensus on global warming is unraveling at a rapid pace. This Wall Street Journal column illustrates that other nations, such as Australia, are unlikely to pass climate change laws of their own. Many scientists are speaking out against the alleged consensus on global warming.

Joanne Simpson, the first women to receive a PhD in meteorology said now that she has retired, she can speak freely about her non-belief. Kiminori Itoh, a Japanese scientist who contributed to the UN report on global warming, calls global warming "the worst scientific scandal in history". Ivar Giaever, a Nobel prize winner in physics, calls global warming a "new religion".

All of these comments are deeply disturbing, and in the case of Joanne Simpson's comment, represents the latest in a line of scientists who have spoken about the fear they or their colleagues have about speaking their mind about global warming because they don't want to hurt their academic careers.

Think about that: we like to think that colleges, universities, and scientific journals operate in an atmosphere of free inquiry, where the ability to follow the facts and speak one's mind are the paramount virtues. But instead, global warming has taken on the aura of received wisdom, and if one disagrees with it, there is something wrong with you.

Opponents of the global warming consensus are sometimes referred to as "global warming-deniers", using the same phrase with similar contempt as being a "Holocaust-denier".

It further illustrates why environmental activists in general, and global warming advocates in general, are proclaiming a new religion. Faith, obedience, and sacrifice are key virtues in most religions, and the environmental / global warming religion is no different. If the science is unclear, don't speak your mind - just believe. If you do speak your mind, ostracize and shun the unbeliever. And of course, sacrifice is the ruling principle - in this case, the extraordinary gift to humanity of the industrial revolution is to be discarded or constrained, for the cause of attempting to reduce temperatures by a tiny bit.

So here's to hoping that his reign of fear will come to an end, hopefully soon.

Health Insurance 102

With the Obama administration and Congressional Democrats hell-bent on their attempt to further nationalize health care in America, it is important to realize that we do not have, nor have had for many years, anything close to a free market in health care.

Over 60 years of government intervention in health care have greatly contributed to the health care problems we face, and perversely have led Obama and others to argue we need further nationalization to address the problems caused by previous government interventions!

One profound problem has been the favorable tax treatment of health care benefits, which has led to overuse of health services. Health benefits do not count as taxable income for the employee, unlike wages, salaries, and bonuses which are taxable income.

This tax disparity has been around since World War II, which came about due to wage controls imposed by the Roosevelt administration (which illustrates one of the recurring elements of government intervention in the economy, in which one intervention creates distortions that give rise to agitation for more government intervention to fix the resulting problem).

For 60 years, employers and employees could increase the total all-in compensation (wages plus benefits) paid to an employee through greater health benefits, and do so in a tax-advantaged way. If the employee got a $100 raise in salary, he was taxed at full tax rates on that increase. But if the employee got a $100 increase in health benefits, he paid no taxes on the increase.

Guess what? People respond to incentives, and they responded by increasing the amount of health benefits because of its favorable tax treatment. The most common way to increase health benefits was for the insurance plan to pay for an ever-greater portion of health care costs. And as my previous column (see here) discusses, people have less incentive to keep health care costs low if they bear little or no incremental cost for using more health care services.

The result? Bad tax policy encouraged an explosion in health care spending.

Medicare has been another element in the government's intervention in the health care marketplace that has had dramatic consequences. Aside from the profound fiscal problems that Medicare is imposing on America, it has important current implications on the cost of health care.

Medicare generally has lower reimbursement rates for procedures than private health insurance, since the government is able to dictate that it will simply pay lower prices. But this means that the price health care provides must charge private insurance companies or individuals is greater, to make up for the lower fees paid by Medicare.

In effect, this Medicare cost-shifting imposes a hidden tax embedded in the cost of health care.

Another profound problem raising the cost of health insurance is that states mandate minimum insurance policies, such as requiring that mental health benefits be included in any insurance policy sold in it that state. Naturally, this drives up the cost of insurance and precludes someone from purchasing a cheaper policy with fewer benefits. It is as if a person couldn't afford a car because the state required you to purchase every car laden with options you can't afford to buy.

So when the press and politicians lament the existence of the uninsured, recognize that many who go without insurance do so because the cost of insurance is artificially raised by Medicare cost-shifting and state-mandated health insurance benefits.

Another problem is that the federal government limits the ability to charge differential costs for health benefits based on health indicators, such as whether a person smokes or their blood pressure levels.

To illustrate how big a deal this is, note the recent experience of Safeway, one of the nation's largest grocery store chains. Safeway's experience, even with limits imposed on its ability to differentiate health insurance costs based on health indicators, suggests that health care spending could be reduced by 40% with improved health.

How does this work? As this Wall Street Journal article discusses, 70% of health care costs are related to a person's behavior. Smoking, obesity, blood pressure, and cholesterol levels, for example, can be improved by changes in an individual's behavior, and Safeway lowers an employee's health insurance cost if he has healthier levels on these four measures.

The result has been dramatic. Safeway employees have responded to the financial incentives by losing weight, lowering blood pressure and cholesterol, and reducing smoking. Health care costs are lower, and health is improved.

Genuine health care reform, which promotes health and lowers costs, would address all these problems.

• The tax advantages of health benefits needs to end (offset by a broad-based tax cut so taxes are not raised in the process), to allow rational health insurance plans to flourish which protect against large costs but give the insured incentives to keep costs low.

• Medicare cost-shifting should stop, or at least shouldn't be exacerbated with more changes that make the problem worse.

• The federal government should allow health insurers to sell policies without mandated minimum benefits, to provide for low-cost insurance options which will reduce the ranks of the uninsured.

• The government should encourage Safeway's experience with differential pricing based on key health indicators, by allowing for greater differentiation and introducing such a system for Medicare and Medicaid.

We don't need to lower the demand for health care by government fiat through further nationalization, such as by introducing waiting times for service and restrictions on the use of new life saving or enhancing technologies. This is what government-run health care looks like in Canada and Europe.

Instead, we need to realize it has been 60 years of government intervention in health care which has led us to the problems we have today, and that we need to embrace freedom to have a better health care system.

Defending America

The United States is moving missile defense systems to Hawaii, as news reports indicate North Korea may be planning a ballistic missile launch toward the islands.

In a different age, when a nation carried out a military attack against another, a severe response (usually war) was the result.

We have been "dumbing down deviancy" for a long time on the international stage, such that attacks against America have not resulted in a vigorous response by us. Recall in 1993 when George H.W. Bush visited Kuwait, Iraqi agents attempted to assassinate him but failed.

Our response? We lobbed some cruise missiles at Iraq without much impact. With such ineffectual responses to acts of war, we should not be surprised when other nations learn the lesson that they don't pay a fearful price for attacking, or attempting to attack, us.

If North Korea does launch a missile toward Hawaii, we should respond vigorously. One place to start is to board their ships on the high seas that we suspect of shipping weapons. Or by striking back at the site of their missile launch.

Doomsday Clock: First Positive Developments in a Long Time*

The attempt by the Iranian regime to manipulate its presidential election results, and to deploy troops to quell post-election protests, reduces the risk of Iran developing nuclear weapons.

That may sound like an odd conclusion, since the stolen election benefits the most ardent proponent of Iran's nuclear programs amongst the candidates, Ahmadinejad.

But the regime's response to the election and the ensuing protests will de-legitimize it further, particular among the left in the west - who have been proclaiming that Iran isn't so bad and we can live with their development of nuclear weapons. The right knew the regime is a danger to America all along.

An election of a "moderate" candidate would have led many in the west that they should give diplomacy even more time to convince Iran to abandon its nuclear weapons program.

Now, they should know better. Or will have a harder time making that argument.

Of course, this assumes that Barack Obama could be convinced, before it is too late, to launch a military strike to destroy or degrade Iran's nuclear program.

Let's hope that the regime's thuggery stiffens Obama's spine, or at least makes him fear the U.S. electoral consequences of letting Iran develop nuclear weapons.

* On ongoing series that looks at the risk of nuclear war arising from Iran's development of nuclear weapons (see here for previous columns).

UN Human Rights Council

We have joined the UN Human Rights Council, after boycotting the council to protest its actions.

While you would think participating in such a council would be of great interest to the United States, and it is, the problem is that many of the world's worst violators of human rights sit on the council - and they vote to avoid criticism of their own policies.

So rather than exposing human rights violations in the world, the council acts as a protector of the worst abusers.

How can this be? Seats on United Nations organizations are allocated to various regions (such as the Middle East, Latin America, Europe, etc). So if China wants to get on this council to protect itself from criticism, and it does, it lobbies other Asian nations to vote for it - and will offer those nations benefits (money, trade, securing favorable UN vote) important to them. And since many countries of the world don't care about human rights as much as they care about the benefits offered by those seeking a seat on this council, they let them get their way.

And we get a human rights council populated with many of the world's thuggish regimes, such as Russia, China, and Cuba. About the only country they decide to criticize is Israel.

It is for this reason that the United States left a predecessor UN organization on human rights, and why the Bush administration boycotted the current council.

Such qualms don't stop the Obama administration, who would rather "engage" with other nations even if the price is granting America's good name to a terrible organization.

Rapacious Corporations?

According to the Commerce Department, corporate profits dropped 20% in the fourth quarter of 2008 from the year earlier. Meanwhile, overall economic activity dropped 6.3%.

So if companies possess the vast powers that the left likes to ascribe to them, how could this happen? Why wouldn't such powerful companies fire enough employees, or cut wages sufficiently, to maintain their profits?

Because this is another one of the Big Lies told by the left.

Profit is the residual claim, after all other expenses are paid. So a given change in economic activity will tend to have a disproportionate impact on profits - both on the upside and downside.

So when the economy grows, we hear complaints about corporate profits growing disproportionately, as if there were something unfair about it. But when the economy contracts, and corporate profits decrease significantly, we hear silence.

We Don't Need No Stinkin' Contracts*

The Obama administration has succeeded in ramming through the courts its restructuring plan for Chrysler that is long on protecting the UAW but is short on honoring the law regarding creditor rights.

The secured creditors of Chrysler are entitled to a higher settlement of their claims against Chrysler than unsecured creditors. This rule on priority is one of the fundamental tenets of our commercial laws. In return for that priority, the secured creditors lent money to Chrysler. Without that security, they either wouldn't have the lent the money, or would have done so at higher interest rates.

But honoring that legal requirement would have meant the UAW, specifically its members' retirement health care benefits, would have had to accept a lower settlement.

So the Obama administration decided that satisfying a key constituent was more important than honoring contractual rights.

The price for the nation will be diminished economic growth going forward, as all investors and lenders now have to demand a higher rate of return on future investments to offset the risk of political expropriation. This higher required return means investors will fund fewer investments and business ventures, which will reduce growth and innovation in our economy.

Since higher growth is the key to improving the standard of living for all Americans, we all became a little bit poorer with this result.

And don't be misled into thinking that if the U.S. Supreme Court didn't overturn the matter, it must be OK. Given the frenzy whipped up by the left and Barack Obama himself on various economic matters that past nine months, it wouldn't be surprising if the justices decided that the astute political move was to avoid upholding the law.

Shame on them for doing so, and even more shame on Obama and the left for deciding that paying off a political ally is more important than following the law and the well-being of the country.

* An ongoing series that looks at the assault on economic rights by the left, with previous articles here and here.

$200 Million for Palau

Barack Obama finally figured out how to get rid of the 17 Uighur detainees held at Guantanamo.

He is paying the island nation of Palau $200 million to take them.

The administration and Palau call it economic aid, but for a nation of 20,000 that isn't exactly a strategic priority for the United States, the payoff is obvious.

These Uigher detainees were captured in Afghanistan, and they received training from Al-Quaeda. We worry that we can't release them into America, since in fact they have received terrorist training and while their cause is independence for their region from China, they could decide to attack America. And we worry that we can't return them to China, since China sees them as terrorists and that country could kill or torture them.

So we are left with this payoff.

Joe Biden

As this Wall Street Journal column illustrates, Joe Biden played a critical role in turning judicial nominations in all-out political war over 20 years ago.

Thanks to Biden, in his role as Chairman of the Senate Judiciary committee in 1987, he facilitated the "borking" of Robert Bork and, after telling Clarence Thomas he would be his biggest defender, he supervised the Anita Hill's spectacle.

While many may thing this is the norm, note that Antonio Scalia, the most feared judge on the Supreme Court by the left for his strong legal views, was confirmed 98-0. The Robert Bork nomination changed all that, thanks to Biden allowing the left to use the confirmation process to smear nominees - all because Biden was planning to run for president in 1988 and he wanted to curry favor with the left in his party.

The result: we have bitter nomination fights over Supreme Court justices and lower-quality judges, because potential nominees with strong legal opinions are easy to criticize.

Thanks, Joe. You are quite the leader.

D-Day

I wonder how many Americans think of D-Day, not just when reminded of it on the news, but in the days leading up to it: bringing it to mind, considering its great place in American and world history, and giving a silent thanks to the American military personnel who fought to free Europe of totalitarianism and to defeat the Nazis.

I also wonder how many people in western Europe think of it, since D-Day represented the beginning of the end of the war and Nazi occupation in Europe, and without the colossal effort by America to wage two enormous wars simultaneously during World War II, one against Japan who attacked America and one against Germany who hadn't, Europeans would have lived for many years, and might still be living, under totalitarian regimes.

A Choice

North Korea's detonation of a nuclear device poses one of those "tests" that were much discussed during the presidential campaign.

The basic choice is: does Obama seek ineffectual UN resolutions and sanctions, or does he add real teeth to such efforts by, for example, imposing restrictions on North Korea's ability to conduct international financial transactions.

Bush did this in 2005 and it caused immense pain for the North Korean dictatorship: access to hard currency is critical to the regime to allow key military and political leaders to enjoy an opulent lifestyle in an impoverished land.

Obama would be wise to reinstate this policy and/or others like it that would impose serious difficulties for the regime.

Will he?

Promises Made, Promises Broken*

Barack Obama continues to govern in contradiction to many of his campaign promises.

His latest flip-flop relates to health insurance. He is now saying he is open to requiring most Americans to be forced to get health insurance, which was Hillary Clinton's position in the Democratic primary last year but which Obama then opposed.

Mandating insurance is like a tax on the insured, typically on lower income people who might elect not to obtain insurance due to the cost - so you can see why Obama would oppose it during the campaign. But it shows the depths of his dishonesty, since socialist medicine plans usually involve compulsory insurance requirements.

Clinton was being honest about this during the campaign last year; Obama wasn't.

* An ongoing series that compares Barack Obama's campaign rhetoric with the reality of his administration's actions and policies.

Change in Plans

As of May 22, the government had spent only 5% of the $787 billion in "stimulus" money.

This is consistent with the fact that the "stimulus" bill passed in February had a relatively small portion of the money spent this year, and large amounts spent over the next 5-10 years. Whatever the merits of such spending in general, and I'm pretty dubious of it as are many economists including some of Obama's advisors in their work before joining the administration, there is no "stimulus" benefit unless it is spent immediately.

Federal Reserve Chairman Ben Bernanke called on the government to reduce its staggering $2 billion budget deficit, due to the risk of higher interest rates choking off economic growth.

So here's an idea: cancel the rest of the "stimulus" plan and save $750 billion.

It will calm markets that the deficit will come under control which will reduce inflation fears and lower interest rates, and since so much of the money is to be spent in out years rather than this year anyway, it won't retard the recovery.

Miguel Estrada

Commentators are excited that Obama's nominee Sonia Sotomayor will be the first Hispanic on the Supreme Court.

Funny how we didn't hear from the same people when Miguel Estrada's nomination by George Bush to an appeals court position, as a possible stepping stone to the Supreme Court, was stonewalled by Democrats.

Let's Party Like its 1499

Farmers are exempt from plans to regulate greenhouse gas emissions through Obama's cap-and-trade plan.

By all means, let's dispense with the Industrial Revolution and the staggering rise in the quality of life that it has brought. Instead, let's embrace a focus on agriculture and services.

Unless, of course, you make cars employing members of the UAW.