ObamaCare – Another Reason Why It's Unconstitutional

By Gerard Francis Lameiro | Published: December 27, 2010

It seems like the more we read, the more we learn that ObamaCare is an economic mistake, a health care mistake, and a constitutional mistake.  In an article in The Wall Street Journal this week, it now appears that ObamaCare also violates the general welfare clause of Article 1 Section 8 of the United States Constitution.  Yes, many of us have believed ObamaCare was unconstitutional from the outset for forcing individuals to participate in an economic marketplace … the market for health care insurance … to purchase health care insurance or face a fine.  Some have argued the ObamaCare ”failure-to-purchase” fine was a tax.  But, that argument has been rebutted as well.  Recall from an earlier blog I wrote that ObamaCare also seems to violate the Right to Privacy Principle.  So, do we now have still another reason why ObamaCare is unconstitutional and why it will eventually be thrown out in court and/or repealed by Congress?  Let’s talk about it more now …

Remember when ObamaCare was being debated in Congress and when the State of Nebraska was given a $100 million exemption to help cover the increased Medicaid costs associated with the bill.  People were upset.  Why should Nebraska get an exemption?  The so-called Cornhusker Kickback was so unpopular that it was removed from the bill.

According to the new WSJ article, the Cornhusker Kickback was simply unconstitutional under the general welfare clause of the Constitution.  Why?  Article 1 Section 8 authorizes Congress with certain powers to provide for the common defense and general welfare of the United States.  General welfare refers to the welfare of each and every state … not one state over the other 49 states.  Clearly, Nebraska should not have been be singled out for special treatment.

In the case of ObamaCare, if a State chooses not to participate, it can lose 100% of its share of Federal funds for Medicaid.  There’s no 5% penalty.  In essence, ObamaCare might be seen as coercing a State into compliance … a compliance it might not be able to handle financially.  Currently, the average State spends about 18% of its tax revenues on Medicaid.  ObamaCare will burden the States further with an unspecified liability to cover an additional 84 million people by 2019.  If a State can’t afford ObamaCare and chooses to opt-out, it can lose all Medicaid funding, hurting the poor people of the State.  This does not serve the general welfare and seems to be an additional reason why ObamaCare is unconstitutional.

As we enter 2011, it’s my hope that America will one day regain a free market in healthcare … without the new dictates of ObamaCare and without the old burdens of past wasteful regulations … but instead, with the lower prices, wider choices, and new innovations brought about by a free market that is free to bring patients and consumers better products and better services at lower prices.

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.

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Posted in Health Care System | Comments closed

Here's Another Example – Raise Taxes, Cut Revenues

By Gerard Francis Lameiro | Published: December 21, 2010

The Wall Street Journal has an editorial this week about taxes in Oregon.  It’s another example that proves the well known relationship between high marginal tax rates and government revenues.  Let’s look at this new example and what it means for economic growth now …

In The Wall Street Journal editorial, we read that in 2009 the State of Oregon raised tax rates on the rich.  Specifically, the tax rate was raised to 10.8% for joint filers with incomes between $250,000 and $500,000, while the tax rate was increased to 11% for joint filers making over $500,000.  (Note that these taxpayers also have to pay Federal income taxes in addition to Oregon income taxes.)

Why did the State raise the taxes on the top 2% of income earners in Oregon?  Simply, they needed more revenues.

However, taxpayers are smart.  They genuinely don’t like to have their taxes raised.  They prefer to keep the money they worked hard to earn.  So, how did Oregon do revenue-wise after the tax increase?  You guessed it.  Tax revenues fell from $180 million in the previous year to $130 million.  Oregon also anticipated 38,000 taxpayers would pay the higher marginal tax rates, but they were wrong.  Only 28,000 taxpayers paid the higher rates.

Why did Oregon lose taxpayers and revenues?  The answer is simple.  High income tax rates act as a disincentive to work.  Some people might move to other States where taxes are lower.  In other cases, one spouse might stay home and stop working.  Sometimes, people will work fewer hours.  Sometimes, they might prefer to retire a few years sooner, rather than give up so much of their income to taxes.

The economic evidence is compelling in example after example, and study after study.  High marginal income tax rates discourage people from working and producing, resulting in lower economic growth and lower revenues to government.

If government wants greater economic activity, greater economic growth, and higher revenues, it’s time to start adopting pro-growth economic tax policies.

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.

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Posted in Taxes | Comments closed

Big Government Employee Unions vs. Taxpayers – What's the Correct Balance?

By Gerard Francis Lameiro | Published: December 13, 2010

In The Wall Street Journal this week, the Governor of Minnesota, Tim Pawlenty writes an important article on government employee unions vs. the taxpayers that views the issue from a moral perspective.  He also offers some principles on how to balance the needs of unions and taxpayers.  Let’s talk more about this now …

As Governor Pawlenty points out, Federal employees on average earn nearly $125,000 in pay and benefits which is about twice the amount of employees in the private sector.  As he indicates, the public employee union members on average earn more, get higher benefits, and have greater job security than their counterparts in private enterprise.  If this is not enough, as the power and coffers of unions grow, public employee unions tend to contribute more and more money to the various liberal politicians that increase government employee union members’ pay and benefits.  In the mid-term elections, unions gave about $91M to liberal politicians.

The irony in all this can be seen, if we view it from a moral perspective.  Unions originated to protect working laborers and their families from economic exploitation.  Today, in sharp contrast, working families need to be protected from high taxes and the excesses of big government, specifically, high spending, high deficits, and high debt, that threaten our long term economic security.  Government union members have gained much.  Now, it’s time to think about the working families that foot the bill, the taxpayers.

What’s the correct balance?  Tim Pawlenty offers three principles to consider.  First, get the government union members’ pay and benefits in line with the private sector.  Why should they be paid double pay and benefits on average?  Second, big government needs to utilize standard accounting methods to accurately understand unfunded liabilities.  Third, big government needs to drop defined-benefit retirement plans for the more realistic defined-contribution plans that industry uses.

Otherwise, we might see many States effectively go bankrupt under the weight of retirement plans that promise more than they can reasonably deliver.

America needs to get its economic house in order.  America needs to realistically and fairly deal with government employee unions.

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.

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Posted in America's Future, Big Government, Choosing the Good Life, Economy, Welfare State Socialism | Comments closed

Taxes, Economic Growth, and the Outlook for 2011

By Gerard Francis Lameiro | Published: December 7, 2010

Taxes are in the news again this week.  Articles abound and the media is filled with story after story on whether or not the proposed changes in tax policies being debated will take place and will they stimulate economic growth.  The extension of the Bush tax cuts, income tax rates, estate taxes, a payroll tax holiday, even an extension of unemployment benefits – they are all being discussed in detail.  What’s the potential impact?  How will these policies affect economic growth?  What’s the outlook for 2011?  Let’s talk more about these important economic topics right now …

First, let’s outline the tax discussion.  From the news, we learn that the Bush tax cuts (set to expire at the end of December) will likely be extended for two years.  In addition, a one-year 2% payroll tax holiday is proposed.  The money will be taken from funds that would normally go to Social Security.  For businesses, there is discussion of allowing businesses to expense (write-off) investments 100% in 2011 (retroactive to September 2010).  Offsetting, these more positive proposals are some other policies that will adversely impact the economy.  These are the re-instatement of a death tax for estates exceeding $5 M (at a 35% rate) and the further extension of unemployment benefits for another 13 months.

What are the impacts of these proposed economic policies, especially as they apply to the potential for economic growth, and the outlook for 2011?  First, the extension of the Bush tax cuts for two years is helpful.  However, it represents simply maintaining the status quo.  It is not an economic growth policy.  Rather, it’s the avoidance of a nearly $1 Trillion tax increase – a job-killing tax increase.  Not only are these tax cut extensions important, but furthermore, additional marginal personal and corporate income tax cuts are needed to help create a major stimulus to the economy.

Second, tax holidays and short term tax rebates do not have a good track record.  In many cases, people spend in the short-term, based on their long-term expectations.  Most people will think a 2% payroll tax break is good.  But, don’t expect a long term boost to the economy.  People are smart and know that the 2% is coming back very quickly.

The same thing happens will businesses.  They will appreciate the short term tax break permitting the expensing of investments in 2011.  But, don’t expect it to impact their real long term planning.

Finally, extending unemployment benefits for 13 more months might seem like a compassionate thing to do.  However, economically, we know such extensions tend to increase the average length of unemployment.

What’s the outlook for 2011 based on these policies?  Answer – continued slow growth and slow job creation.  Plus, with continued qualitative easing by the Fed, so-called QE2, we can expect significant inflation.  Taken together, don’t look for robust GDP growth in 2011.

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.

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Posted in Economic Growth, Economy, Job Creation, Jobs, News, Taxes | Comments closed

Will Apparel Prices Jump 20% – 30% in 2011? What's the Outlook?

By Gerard Francis Lameiro | Published: November 30, 2010

An Investor’s Business Daily article this week suggests we might see apparel prices soaring up to 30% higher in 2011.  Are clothing prices going to skyrocket?  What’s behind the potential inflation in the apparel industry?  Let’s talk about it more now …

Unfortunately, it’s true.  Clothing prices will likely jump in 2011 after over 20 years of stable prices.  Cotton futures, one indication of things to come, peaked at a high earlier this month of $1.12 per pound.  That might not seem high, except if you compare it with a price of about 70 cents per pound in February which amounts to about a 40% increase in cotton.  In addition, the cost of labor in China is estimated to be about 20% to 25% higher and shipping costs are up too.

It’s also true that many companies will try to hold off or forestall price increases to consumers.  Some companies will probably change their product mix as well – adding synthetics such as acrylic and polyester in place of the more expensive cotton products.  Note that synthetics are hydrocarbon-based and their prices have increased too.  Bottom line, there still seems to be solid evidence that consumers will see higher clothing prices in 2011.

Why has the price of cotton risen so much, so quickly?  There are several factors.  One is the weak dollar.  Readers of this blog know that a weak dollar is not a prescription for a strong economy or economic growth.  A weak dollar means we pay more for commodities like cotton.  Additional factors include the strong demand for cotton in emerging economies in Asia and the lack of larger cotton crops in the U.S.

Overall, it’s probably safe to expect cotton products to be up substantially in 2011.  Other apparel will likely rise as well, although possibly at levels more moderate.

America needs a pro-economic growth policy that includes lower taxes and reduced government spending as well as a strong dollar policy and a discontinuation of the qualitative easing policy that tends to create inflation.

A special note.  According to the Investor’s Business Daily article, rising cotton-based goods will not likely make a big dent in the 2011 inflation data because of the way the Consumer Price Index is calculated.  IBD states: “The CPI process of substitution assures that cotton goods will lose weighting in the index as prices rise.”

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.

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Posted in Apparel Industry, Economy, Inflation | Comments closed

The Economics of Global Warming – Important, New Information!

By Gerard Francis Lameiro | Published: November 22, 2010

In my 2009 prophetic book, America’s Economic War, about the war between American Capitalism and socialism, I wrote that: “The so-called global warming “crisis” is about controlling the economy, controlling you, and eliminating your economic freedom.  It accomplishes this by convincing you to alter your lifestyle or risk the survival of the planet.”  In that book, I presented considerable evidence that there was no global warming “crisis” and that the so-called “crisis” was manufactured.  Now, there is important, new information supporting my book.  Let’s talk about it more now …

Since America’s Economic War was written, the evidence that the so-called global warming “crisis” was manufactured continues to surface.  In an Investor’s Business Daily (IBD) op-ed piece this week, the devastating Climate-gate and IPCC scandals were recounted where scientific data was used to fool the world.  But, now IBD, reports on important, new information.  The op-ed piece cites Ottmar Edenhofer, an economist, who is the co-chair of the U.N. Intergovernmental Panel on Climate Change’s (IPCC) Working Group III on Mitigation of Climate Change: “The climate summit in Cancun at the end of the month is not a climate conference, but one of the largest economic conferences since the Second World War.”  IBD quotes Edenhofer further: “climate policy is redistributing the world’s wealth.”

Bingo!  Wealth redistribution is the real purpose of the IPCC’s efforts and for the so-called global warming “crisis.”  Of course, wealth redistribution is just another way of saying that they seek global socialism.  Now, however, it’s no longer hidden behind feel-good environmentalism.  It’s out in the open!  It’s all about moving the world toward global socialism.

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.  

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Posted in Energy Economics, Energy Industry, Environmental Socialism, Global Warming | Comments closed

Is State Capitalism Superior to Market Capitalism? The Case of China.

By Gerard Francis Lameiro | Published: November 16, 2010

An article in The Wall Street Journal this week raises questions about the long-standing consensus that market competition is better than central planning.  Using an example from China’s success in the emerging solar energy industry,  the question arises: Is State Capitalism superior to Market Capitalism?  If not, how can China’s successes be explained?  Let’s talk about it more now …

As The Wall Street Journal article explains, in 2007, there was a shortage in polycrystalline silicon, a raw material used to create solar panels.  In 2008, the price of polycrystalline silicon skyrocketed to $450 per kilogram.  In turn, these high prices were passed along to Chinese companies.  The Chinese government decided to take action and make the raw material a priority.  With the support of the Chinese government, money flowed in and fast regulatory approvals were obtained.  The results included the development by Zhu Gongshan of one of the world’s biggest polycrystalline silicon companies, GCL-Poly Energy Holding Ltd.  Also, China now produces about 25% of the world’s polycrystalline silicon supply and controls more than 50% of the market for finished solar power equipment.

So, does this mean State Capitalism is superior to Market Captialism?  No!  Not at all.  The reason is that in this example, we are not comparing State Capitalism to Market Capitalism.

In reality, China is practicing State Socialism with some elements of capitalism permitted.  In contrast, America is practicing Hampered Capitalism with increasing elements of Welfare State Socialism permitted.  If America’s energy industry were not so highly regulated, I think American innovation and competition would have prevailed over the Chinese model in finished solar energy products.  Economic freedom always leads to increasing innovation, higher standards of living, and greater prosperity.

One other note to consider.  When a country practices State Socialism, it might reap some successes.  But, what economic opportunity costs does it incur for those successes?  Without a truly Free Market, there is no guarantee that scarce resources are used most efficiently and effectively.  No matter how hard a country tries, global economic optimization is not possible under a centrally planned economy.  Central planning is not a good substitute for people acting freely within a Free Market.

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.

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Posted in Energy Industry, Market Capitalism, Solar Energy Industry, State Capitalism | Comments closed

Life, Liberty, and the Pursuit of Happy Meals – The Road to Serfdom?

By Gerard Francis Lameiro | Published: November 8, 2010

What is happening in America today?  According to a piece in Investor’s Business Daily this week, children in San Francisco will not be allowed to buy a McDonald’s Happy Meal starting December 31st, all in the name of “food justice.”  Haven’t San Francisco’s Board of Supervisors ever read The Declaration of Independence?  Haven’t they ever heard of our unalienable rights, endowed by our Creator – the rights of life, liberty, and the pursuit of happiness?  Is America on the road to serfdom?  Let’s talk about it more now …

Making McDonald’s Happy Meals illegal in San Francisco is truly astounding.  It represents a milestone in eliminating economic freedom in America.  Because of a handful of supervisors in San Francisco, by a vote of 8 to 3, McDonald’s can’t give away a toy with a children’s meal unless it contains less than 600 calories, less than 640 milligrams of sodium, and less than 35% fat (including 10% saturated fat), plus it must include one half cup of fruit or 3/4 cup of a vegetable.  Talk about micro-management of one’s life.  What about if someone loves high fat foods?  Why aren’t they free to pursue happiness as they see it?

Incidentally, IBD points out that among ten companies in the restaurant industry listed in the article, McDonald’s has a sterling record with over $84B in market capitalization, a return on equity of 33.2%, and a pre-tax profit margin of 29.2%.  With results like that, customers must really find value at McDonald’s.  Successful companies in any industry must be serving their customers.

It’s time to get off the road to socialism and serfdom.  It’s time Americans return to economic freedom.  Individuals should decide what they eat, not big government officials or bureaucrats.

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.

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Posted in America's Future, Big Government, Choosing the Good Life, Economic Freedom, Regulations, Restaurant Industry | Comments closed

What's the Real Significance of this Election to the American Economy?

By Gerard Francis Lameiro | Published: November 2, 2010

If the pundits and commentators are correct, today’s election will be historic in scope.  Most think the House will change hands and some believe the Senate might change as well.  Simply changing party control, however, is not the complete reason for its being a historic election.  It’s the extent of turnover of seats in both the House and Senate.  Most importantly, it’s also the repudiation of a governing philosophy and an economic philosophy.  What’s the real significance of this election?  Let’s talk about it more now …

From polling data, we know that Americans overwhelmingly prefer smaller government with lower taxes and fewer services to its opposite (bigger government with higher taxes and more services).  In the last two years, Washington has ignored the American people, choosing instead to run up incredibly high deficits and unsustainable debt.  Washington has also chosen to increase the size, power, and scope of big government with programs such as the de facto socialization of the health care industry (against the clear wishes of the American people).  New taxes and increased taxes just add to the policies that hold back the American economy from creating new businesses, new jobs, and economic growth.

In my opinion, the significance of this election is simple and straight forward.  The American people are telling Washington that they want smaller government, lower deficits, lower debt, and fewer programs.  They are sending a signal that they want economic freedom and economic growth.  They also want Washington to repeal the health care law.

If this election helps change the minds of those in Washington, if pro-growth fiscal and monetary policies are followed, this election will truly be historic and the American economy will be impacted greatly in a positive way.

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.

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Posted in America's Future, Big Government, Economic Freedom, Economic Growth, Economy, Health Care System, Jobs, Limited Government, Taxes, Uncategorized | Comments closed

Have Big Government Regulations on Small Businesses Gone Way Overboard?

By Gerard Francis Lameiro | Published: October 25, 2010

In a surprising and startling editorial this week in The Wall Street Journal, a new study by the Institute for Justice is cited, detailing regulation after regulation, heaped upon entrepreneurs and small businesses in Los Angeles.  You might think that Los Angeles with an unemployment rate of 13.7% in September might want to encourage people to start small businesses and earn a living for themselves, or, better yet, start small businesses and create new jobs for others as well as themselves.  But, that doesn’t seem to be the case according to The Wall Street Journal.  Have big government regulations on small businesses gone way overboard?  Are regulations helping to keep unemployment high?  And, importantly, are they also holding back the American economy?  Let’s talk about these questions more right now …

Here are some facts from the study.  In Los Angeles, if you lose your job and you want to make some money, you might think of starting a business.  In LA, if you want to earn some money hanging wallpaper, trimming trees, or building fences, you must first obtain a license called a “speciality contractor” license.  But, don’t think you can count on getting that license in a day or a week.  It can take years!  Suppose you have a flair for clothing and want to design and make hip clothes for teenagers.  Sorry to say.  But, in LA, you need a garment manufacturer’s license.

Still other examples of enterprise-crippling regulations.  In Los Angeles, even with a license from the LA County Department of Health, you are not allowed to open a sidewalk vending business, push your cart, and bring in a little income.  If you’re a taxi cab driver, you are not allowed to work for yourself.  You must lease a cab at very high rates. 

Dog-sitting, sewing clothes, cutting hair – you guessed it – there are regulations!  Maybe, you want to sell used paperback books.  If you do, in LA you’re required to get a “police permit.”

While some regulations were probably created to foster public health and safety, many regulations seem designed to help certain economic interests over those of other people.  Regardless of the reasons such regulations were created, they are definitely stifling economic growth and hurting individuals and small businesses who are trying to survive in a tough economy.

Clearly, free enterprise is not so free anymore in some cities across the U. S.  Not only do entrepreneurs have to deal with burdensome Federal and State taxes and regulations, but they also have to overcome City and County taxes and regulations.  Have big government regulations on small businesses gone way overboard?  The answer is a resounding Yes!  Americans need economic freedom and free enterprise to ignite the engines of small business job growth.

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.

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Posted in Big Government, Choosing the Good Life, Economic Freedom, Economic Growth, Job Creation, Jobs, Regulations, Small Businesses | Comments closed