Obama Care – The Audacity of Illusion in the Temple of Doom!

Health-care reform is now the top issue discussed and debated in Congress and the media several times a day. There is a great reason why that is: health-care purchases – or health insurance, is the most important good/service human beings can buy to preserve their health and their quality of life. Before we get into discussing the above, it helps to put things in perspective as to where we are today, as a nation, financially speaking.

We have gone through the economic stimulus commitments of about $1 trillion (stimulus package plus bail-outs), and concentrating on the stimulus, we have not seen anything close to what the President said, i.e., that the stimulus would boost the economy immediately with about 200,000+ new jobs, etc. The fact of the matter is since the President took office, unemployment is out of control with more than 2 million jobs lost and key states, such as California, showing rates that are above 11-12%! Therefore, bailing out wall-street and promising money freely has not done anything positive. The main reason for this is the fact that the economic philosophy these actions are based on belongs in the 1930’s and have no place in the internet-contrived, fast-paced, boundless world economy. The Keynesian multiplier effect of spending $1 to get back $1.5 is a myth; if it was true, whenever governments were faced with recessions, all they had to do would be to overspend – not just $1 trillion, like Mr Obama is doing now, but $2 or even $10 trillion for that matter. Why stop at $1 trillion? Hence, these actions are bound to fail and we have seen the results already.

Today, we have the CIT bankruptcy in the works. CIT is a lender of about 950,000 mostly small businesses, those businesses who have receivables and need credit to keep them going until their customers pay their bills. Small businesses are responsible for creating over 90% of all the new jobs, hence needless to say, CIT going bankrupt would create a havoc in the small business world with unprecedented concequencies. As of this week, the Obama administration was not willing to bail out this institution. So how does this work? The administration is willing to bail out institutions with overpaid CEOs which do not create jobs but is not interested to help CIT which sustains businesses that create jobs! Well, we’ll debate this topic in another paper, but for now this is the state of financial condition that health-care reform finds itself in.

The health-care reform the President promised and Congress has put forward for review/vote, promises to provide universal coverage to all Americans while reducing the escalating costs of care. The Congressional Budget Office (CBO), the branch of Congress responsible for costing out government programs via unbiased analyses, came out and said this week: “We do not see the sort of fundamental changes that would be necessary to reduce the tranjectory of federal health spending by a significant amount. On the contrary, the legislation significantly expands the federal responsibility for health-care costs”. In other words, the proposed legislation, which now is in the tune of about $1 trillion (on top of the $1 trillion bailout!), will put the government in a spiral of cost over runs, probably indefinitely, with future generations inheriting this unbearable debt.

So how does one pay for such an enormous social plan, assuming there is madness enough in Congress to pass this bill? Well, there are two major options:

1) cut Medicare dramatically – there is talk of capturing half the proposed plan’s cost (i.e., $500 billion) by reducing Medicare services, which by the way are sub-optimal to begin with. The end result of such an action will be severe reduction of services to seniors, not covering of certain illnesses (just allowing people to fade away), doctors unwilling to take Medicare patients – since by doing so will put their practice in financial chaos and the list goes on.

2) imposing higher taxes, Mr. Obama’s upsession with distributing the wealth. Taxing the “rich” is a silly idea as the rich are mobile, can move elsewhere, find ways to reduce their tax burden (small businesses that pay at individual rate will shift to pay the 35% corporate tax, etc). We are talking about taxes that bring the effective federal rate at about 48%, plus any state and/or local taxes, we are talking the average tax rate reaching 52-55%, a ridiculous policy that will definitely wipe out any competitive advantage left for the US to be a dominant force in the near or far future. It will put us higher that socialist countries like France (45.8%), and at par with Sweden (56.4%), Denmark (60.0%), not to mention the highest states in the Union, i.e., California (56.8%) and New York (56.9%). And we know what economic condition are California and New York: they are going bankrupt!

I believe the best way to test the proposed health reform is to ask Congress to sign up for it, something that took place on Tuesday, July 14! All democrats, with three exceptions, voted against enrolling in the proposed health-care plan! So there you have it. So the question is – if Congress does not believe in it, why are they willing to vote for something that will make America suffer, physically, emotionally and financially? I think it all begun with Mr. Obama’s upssesion to redistribute wealth from the supper rich, while suppressing the middle class so that they never reach the rich status. At 55% tax rate, no matter how much effort you put into your business, you will never make rich, whatever the definition of rich is. And the worst thing of all, the lower class will never get out of poverty either, because if the small business is destined to fail, who will hire the little guy to get them out of poverty?

The final question is: what drives Mr. Obama, a smart man by any standards, to adapt such a myopic philosophy? Answer: naivete or complete misunderstanding of how economics works and how societies function. It has to be. There is no other explanation. If this is the case, he is taking this country to an unprecedented catastrophe, which like a black hole, once you come close or fall in, you will never get out! You ask the question: is this possible? Well, I grew up in Greece, once the richest place in the universe, where democracy was born. Look at it now, a beautiful place to visit but hardly a place you’d want to live. What a shame. Perhaps there is time, if most Americans check romanticism at the door and think of their sons or daughters. If they do, that would be the “audacity of hope”!

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