Plain Language (Part 1)

What follows is an extract from one of the proposed Congressional bills to re-form U.S. healthcare: Senate bill S. 1679, The Affordable Healthcare Choices Act as of July 15, 2009 (pdf).

CAUTION: People have been injured trying to stay awake while reading legislation.

S. 1679 is the 839-page Health, Education, Labor, and Pensions (HELP) Senate committee version of the 1017-page House bill, HR3200, America's Affordable Health Choices Act of 2009 (pdf). Both bills are detailed attempts to micro-manage the healthcare industry, but most legislators will vote after reading only a 25-page summary (pdf) written in conceptual language (plain English) by the Senate committee. The Senate Finance Committee has another version of the bill available online only as a 262-page marked up summary: Finance chairman Baucus' America's Healthy Future Act (pdf).

The extract from Senate bill S. 1679 is shown in legalese, followed by a one paragraph summary from the conceptual language document. Sections 152 and 161 below, describe the proposed changes to the Internal Revenue Code to add penalties for individuals not carrying healthcare insurance, and for voluntary authorization to the Treasury secretary to release individual tax information to the Department of HHS.

Sections 152 and 161, Pages 158-166, of Senate Bill S. 1679, The Affordable Healthcare Choices Act

(From O:\BAI\BAI09I50.xml [file 1 of 6] S.L.C.pp. 158-166)

16 SEC. 152. PROGRAM INTEGRITY.
17 (a) IN GENERAL.—Subsection (l) of section 6103 of
18 the Internal Revenue Code of 1986 is amended by adding
19 at the end the following new paragraph:
20 ‘‘(21) VOLUNTARY AUTHORIZATION FOR IN

21 COME VERIFICATION.—
22 ‘‘(A) VOLUNTARY AUTHORIZATION.—The
23 Secretary shall provide a mechanism for each
24 taxpayer to indicate whether such taxpayer au

25 thorizes the Secretary to disclose to the Sec

p. 159
1 retary of Health and Human Services (or, pur

2 suant to a delegation described in subsection
3 (d)(4)(B), to a State or a Gateway (as defined
4 in section 3101 of the Public Health Service
5 Act) return information of a taxpayer who may
6 be eligible for credits under section 3111 of the
7 Public Health Service Act.
8 ‘‘(B) PROVISION OF INFORMATION.—If a
9 taxpayer authorizes the disclosure described in
10 subparagraph (A), the Secretary shall disclose
11 to the Secretary of Health and Human Services
12 (or, pursuant to a delegation described in sub

13 section (d)(4)(B), to a State or a Gateway) the
14 minimum necessary amount of information nec

15 essary to establish whether such individual is el

16 igible for credits under section 3111 of the
17 Public Health Service Act.
18 ‘‘(C) RESTRICTION ON USE OF DISCLOSED
19 INFORMATION.—Return information disclosed
20 under subparagraph (A) may be used by the
21 Secretary (or, pursuant to a delegation de

22 scribed in subsection (d)(4)(B), a State or a
23 Gateway) only for the purposes of, and to the
24 extent necessary in, establishing the appropriate
p. 160
1 amount of any payments under section 3111 of
2 the Public Health Service Act.’’.
3 (b) COLLECTION OF AMOUNTS.—Section 6305(a) of
4 the Internal Revenue Code of 1986 is amended by insert

5 ing ‘‘or under section 3111 of the Public Health Service
6 Act’’ after ‘‘Social Security Act’’.
7 (c) CONFORMING AMENDMENTS.—
8 (1) Paragraph (3) of section 6103(a) of such
9 Code is amended by striking ‘‘or (20)’’ and inserting
10 ‘‘(20), or (21)’’.
11 (2) Paragraph (4) of section 6103(p) of such
12 Code is amended by striking ‘‘(l)(10), (16), (18),
13 (19), or (20)’’ each place it appears and inserting
14 ‘‘(l)(10), (16), (18), (19), (20), or (21)’’.
15 (3) Paragraph (2) of section 7213(a) of such
16 Code is amended by striking ‘‘or (20)’’ and inserting
17 ‘‘(20), or (21)’’.
18 Subtitle D—Shared Responsibility
19 for Health Care
20 SEC. 161. INDIVIDUAL RESPONSIBILITY.
21 (a) PAYMENTS.—
22 (1) IN GENERAL.—Subchapter A of chapter 1
23 of the Internal Revenue Code of 1986 (relating to
24 determination of tax liability) is amended by adding
25 at the end the following new part:
p. 161
1 ‘‘PART VIII—SHARED RESPONSIBILITY
2 PAYMENTS
‘‘Sec. 59B. Shared responsibility payments.
3 ‘‘SEC. 59B. SHARED RESPONSIBILITY PAYMENTS.
4 ‘‘(a) REQUIREMENT.—Every individual shall ensure
5 that such individual, and each dependent of such indi

6 vidual, is covered under qualifying coverage at all times
7 during the taxable year.
8 ‘‘(b) PAYMENT.—
9 ‘‘(1) IN GENERAL.—
10 ‘‘(A) IN GENERAL.—In the case of any in

11 dividual who did not have in effect qualifying
12 coverage (as defined in section 3116 of the
13 Public Health Service Act) for any month dur

14 ing the taxable year, there is hereby imposed
15 for the taxable year, in addition to any other
16 amount imposed by this subtitle, an amount
17 equal to the amount established under para

18 graph (2).
19 ‘‘(B) RULE FOR DEPENDENTS.—Any
20 amount to be imposed under this subsection
21 with respect to an individual described in sub

22 paragraph (A) that is a dependent (as defined
23 in section 152) of another taxpayer shall be im

24 posed—
p. 162
1 ‘‘(i) except in any case described in
2 clause (ii), upon the taxpayer on whom
3 such individual is a dependent; or
4 ‘‘(ii) in any case in which the taxpayer
5 with respect to whom such individual is a
6 dependent files a joint return, jointly upon
7 the taxpayer and the spouse of the tax

8 payer.
9 ‘‘(C) LIMITATION.—The maximum amount
10 imposed under this paragraph with respect to
11 any taxpayer shall not exceed 4 times the
12 amount determined under paragraph (2)(D).
13 ‘‘(2) AMOUNT ESTABLISHED.—
14 ‘‘(A) REQUIREMENT TO ESTABLISH.—Not
15 later than June 30 of each calendar year, the
16 Secretary, in consultation with the Secretary of
17 Health and Human Services and with the
18 States, shall establish an amount for purposes
19 of paragraph (1).
20 ‘‘(B) EFFECTIVE DATE.—The amount es

21 tablished under subparagraph (A) shall be ef

22 fective with respect to the taxable year following
23 the date on which the amount under subpara

24 graph (A) is established.
p. 163
1 ‘‘(C) REQUIRED CONSIDERATION.—Subject
2 to the limitation described in subparagraph (D),
3 in establishing the amount under subparagraph
4 (A), the Secretary shall seek to establish the
5 minimum practicable amount that can accom

6 plish the goal of enhancing participation in
7 qualifying coverage (as so defined).
8 ‘‘(D) LIMITATION.—
9 ‘‘(i) IN GENERAL.—Subject to an ad

10 justment under clause (ii), the amount es

11 tablished under this subparagraph is $750.
12 ‘‘(ii) INFLATION ADJUSTMENT.—Be

13 ginning with taxable years after 2011, the
14 amount described in clause (i) shall be ad

15 justed by the Secretary by notice, pub

16 lished in the Federal Register, for each fis

17 cal year to reflect the total percentage
18 change that occurred in the medical care
19 component of the Consumer Price Index
20 for all urban consumers (all items; U.S.
21 city average) during the preceding calendar
22 year.
23 ‘‘(c) EXEMPTIONS.—Subsection (b) shall not apply to
24 any individual—
p. 164
1 ‘‘(1) with respect to any month if such month
2 occurs during any period in which such individual
3 did not have qualifying coverage (as so defined) for
4 a period of less than 90 days,
5 ‘‘(2) who is a resident of a State that is not a
6 participating State or an establishing State (as such
7 terms are defined in section 3104 of the Public
8 Health Service Act),
9 ‘‘(3) who is an Indian as defined in section 4
10 of the Indian Health Care Improvement Act,
11 ‘‘(4) for whom affordable health care coverage
12 is not available (as such terms are defined by the
13 Secretary of Health and Human Services under sec

14 tion 3103 of the Public Health Service Act), or
15 ‘‘(5) described in section 3116(a)(4)(C) of the
16 Public Health Service Act.
17 ‘‘(d) COORDINATION WITH OTHER PROVISIONS.—
18 ‘‘(1) NOT TREATED AS TAX FOR CERTAIN PUR

19 POSES.—The amount imposed by this section shall
20 not be treated as a tax imposed by this chapter for
21 purposes of determining—
22 ‘‘(A) the amount of any credit allowable
23 under this chapter, or
24 ‘‘(B) the amount of the minimum tax im

25 posed by section 55.
p. 165
1 ‘‘(2) TREATMENT UNDER SUBTITLE F.—For
2 purposes of subtitle F, the amount imposed by this
3 section shall be treated as if it were a tax imposed
4 by section 1.
5 ‘‘(3) SECTION 15 NOT TO APPLY.—Section 15
6 shall not apply to the amount imposed by this sec

7 tion.
8 ‘‘(4) SECTION NOT TO AFFECT LIABILITY OF
9 POSSESSIONS, ETC.—This section shall not apply for
10 purposes of determining liability to any possession of
11 the United States. For purposes of section 932 and
12 7654, the amount imposed under this section shall
13 not be treated as a tax imposed by this chapter.
14 ‘‘(e) USES.—Amounts collected under this section
15 shall be dedicated to premium credits established under
16 section 3111 of the Public Health Service Act.
17 ‘‘(f) REGULATIONS.—The Secretary may prescribe
18 such regulations as may be appropriate to carry out the
19 purposes of this section.’’.
20 (2) CLERICAL AMENDMENT.—The table of
21 parts for subchapter A of chapter 1 of such Code is
22 amended by adding at the end the following new
23 item:
‘‘PART VIII—SHARED RESPONSIBILITY PAYMENTS’’.
p. 166
1 (3) EFFECTIVE DATE.—The amendments made
2 by this section shall apply to taxable years beginning
3 after December 31, 2011.

Could you understand much of the extract?

If not, don't worry, neither can the legislators arrogant enough to believe they're qualified to micro-manage the US healthcare industry.

Summary Paragraph

Here's the conceptual language paragraph from the detailed summary of S. 1679 (pdf), summarizing the extract above:

Individual Responsibility. All individuals will be required to obtain health insurance coverage.
Exemptions will also be made for individuals for whom affordable health care coverage is not
available or for those for whom purchasing coverage creates an exceptional financial hardship. The minimum penalty to accomplish the goal of enhancing participation in qualifying coverage will be no no more than $750 per year. Individuals deemed to lack availability to affordable coverage (as determined in section 3103), Indians, individuals living in states where Gateways are not yet established, and individuals without coverage for fewer than 90 days are exempt from the penalty. (§ 161, 59B)

Most legislators read the conceptual language summary of the legislation and not the actual bill.

Why? Because they don't understand the legalese. The problem with a summary is that it's written to describe only the intent of the legislation, not necessarily the implementation. Certain details may be selectively omitted. The summary then becomes a subjective document, no longer an accurate portrayal of the legislation.

What's missing in the example above? Section 152 "Voluntary Authorization for Income Verification." It is nowhere in the summary document. Sounds very similar to another part of the same code: our "voluntary compliance" income tax system (video).

What other details from the 839-page legislation were left out of the 25-page summary?

The Limits of Power (Part 3)

Today another President wants to "give" Americans both guns and butter as LBJ did over 40 years ago. President Obama wants to re-form America while fighting two foreign wars. The financial system is collapsing, and yet many Americans still haven't looked behind the curtain, many still believe the magic of something for nothing.

Ironically Moyers, who was a part of LBJ's administration, still doesn't get it: he still believes the magic. Now a journalist, Moyers still believes the federal government can re-form society. In an August 28, 2009 interview on HBO's "Real Time With Bill Maher", Moyers said he wants the Obama administration to battle Rs for healthcare "reform":

"I think if Obama fought, instead of finessed so much, he stood up and declared for what is really the right thing to do and what is really needed instead of negotiating the corners away, instead of talking about bending the curve, and talking about actuarial rates, if he were to stand up and say, 'We need this because we're a decent country', I think it would change the atmosphere."

Moyers misleads in a manner common to "Great Society" advocates: they ignore the reality of scarce resources and pretend the government really has magical powers. Economist Thomas Sowell warns against this in his book, Basic Economics: A Citizen's Guide to the Economy:

"Too often a false contrast is made between the impersonal marketplace and the compassionate policies of various government programs. But both systems face the same scarcity of resources and both systems make choices within the constraints of that scarcity. The difference is that one system involves each individual making choices for himself or herself, while the other system involves a smaller number of people making choices for others."[1]

Finding the Right Metaphor: Uncle Sam as the Candy Man

Moyers hasn't learned from his past nor has he applied the lessons of the "limits of power" to the current situation as he encourages Obama to be profligate with other people's money. Ever the press secretary, Moyers believes Obama has to "find the right metaphor" to sell Americans on another government encroachment into healthcare:

"He didn't find the right metaphors ... and he didn't speak in simple powerful moral language."

Moyers was "intrigued" by Bacevich's metaphor of the federal government engaging in a "de facto Ponzi scheme," but not enough to convince himself that more meddling in healthcare by the federal government is doomed to failure:

BILL MOYERS: And you use this metaphor that is intriguing. American policy makers, quote, "have been engaged in a de facto Ponzi scheme, intended to extend indefinitely, the American line of credit." What's going on that resembles a Ponzi scheme?

ANDREW BACEVICH: This continuing tendency to borrow and to assume that the bills are never going to come due. I testified before a House committee six weeks ago now, on the future of U.S grand strategy. I was struck by the questions coming from members that showed an awareness, a sensitivity, and a deep concern, about some of the issues that I tried to raise in the book.

"How are we gonna pay the bills? How are we gonna pay for the commitment of entitlements that is going to increase year by year for the next couple of decades, especially as baby boomers retire?" Nobody has answers to those questions. So, I was pleased that these members of Congress understood the problem. I was absolutely taken aback when they said, "Professor, what can we do about this?" And their candid admission that they didn't have any answers, that they were perplexed, that this problem of learning to live within our means seemed to have no politically plausible solution.

Obama may not have found the right metaphor, but Tim Hawkins has. Watch his three-minute video. Even Moyers might understand this one.

_____________________________

[1] Basic Economics: A Citizen's Guide to the Economy, Thomas Sowell, Basic Books, New York, N.Y., 2000, pp. 49-50

The Limits of Power (Part 2)

When it comes to bailouts and government programs, doesn't money seem to appear by magic? Congress and the President, and their well-paid magician's helpers think they can solve any problem. Those in the audience just have to reach out a hand and grab what they need. Do any of those with their hands out ever wonder what’s going on behind the curtain?

The Tipping Point

In 1964 LBJ (D) announced his vision of the "Great Society," a continuation of FDR's socialization of America.[1] LBJ wanted to "re-form" America using the magical power of the federal government. He signed legislation to end racial injustice and poverty, create a permanent food stamp program, protect the environment, supply federal aid to public schools, fund the arts, create public television, create consumer protection laws, create the Department of Housing and Urban Development, create the Department of Transportation, fund mass transit, and create Medicare and Medicaid. If it was possible to legislate utopia, why hadn't anyone done all of this before?

The Social Security Act of 1965 created Medicare and Medicaid, America's first public health "insurance" and LBJ's proudest moment. Today out of control Medicare spending is one of the Obama (D) administration's excuses to "re-form" healthcare again. The chart shows federal healthcare spending as a percentage of GDP. The percentage starts increasing after 1965. This also marks the start of Bacevich's tipping point, when the US government started spending more dollars than it was taxing, Americans demanded services they couldn't afford, and the magical ability of the federal government to create wealth out of nothing started to go out of control.

Federal Government Spending in inflated dollars as a percent of GDP, source www.usgovernmentspending.com

While massively increasing spending at home for his "Great Society," LBJ was also busy escalating spending on a foreign war. To work his magic, LBJ wanted lots of guns and lots of butter.[2] He left his successor a bloated federal bureaucracy, a war in Vietnam, and the seeds of a bad economy. Americans picked a new magician and substituted an R for a D. Nixon (R) continued LBJ's policies, just as today Obama continues Bush's (R) policies.

Tipped Over

On August 15, 1971, Nixon halted US Treasury payouts of gold for foreign central bank dollars, preventing the French and the Swiss from depleting the US Treasury by redeeming their dollars for gold. In 1944, the Bretton-Woods agreement of fixed currency exchange rates based on a gold-backed dollar had created a system of US dollar hegemony. The almighty US dollar was the preeminent currency--as good as the US Treasury gold that backed it. The French and Swiss central banks must not have believed the magic of all those dollars the US government created for its "Great Society" and the war in Vietnam.

Unhindered by foreign central bank redemptions of dollars for the limited supply of US-held gold, the federal government could continue to inflate the US money supply at an even faster rate. The politicians began to truly create wealth from nothing. That was really magical!

But if the dollar was no longer backed by gold and the US was flooding the world with it, why would anyone accept it for real goods?

Behind the Curtain: Black Gold and the Petrodollar

The dollar is still accepted because the U.S. government made a deal. In exchange for US military protection for some of the oil-rich kingdoms in the Middle East, particularly Saudi Arabia, OPEC agreed to price oil in US dollars. Since 1972, OPEC oil has been priced in US dollars. Oil--black gold--backed the dollar. Now everyone in the world would need dollars to purchase oil. Dollar hegemony was saved. The world would still use dollars, but instead of gold-backed dollars, they would be oil-backed petrodollars.[3][4] The artificial demand for the dollar, due solely to US military might, put the US in a position to “rule” the world.[5][6] The global dollar flood could continue.

The oil price shock of the mid-70s marks the end of Bacevich's tipping point and the beginning of the full-scale slide to the destruction of the American financial system. The price of a barrel of oil tripled in 1973-4 and doubled in 1979-80 when OPEC reduced production in reaction to both US support of Israel and continuing US government dollar inflation.[7] The Nixon administration figured the price shock would hurt their trading partners, and now economic rivals in Europe and Japan, worse than it would hurt the US. In his memoirs, Henry Kissinger confirmed the view that the US government welcomed the oil price rise in 1973 as an economic blow to the strengthening economies of Europe and Japan.[8] It didn't matter to Kissinger that everyday Americans suffered the consequences of the 1970s stagflation.

From 1972 on, oil had to continue to be priced in dollars to maintain the magic of dollar hegemony: any threats to this arrangement were forcefully suppressed by the US military. Recognizing where the magic for the fiat dollar came from, then President Carter (D) created the Rapid Deployment Force in 1977. The US military had to be available for police work wherever the oil was. The Iraq invasion, US saber rattling against Iran, and a coup attempt in Venezuela are the most recent examples of the US government using force to maintain dollar hegemony.[9]

Of course dollar hegemony isn't really magic, and we can't continue to expect to flood the world with worthless paper forever. But the US government and many people continue to believe we can: for the last four years, the trade deficit, Bacevich's symptom of America's unhealthy financial system, has averaged over $700 billion. The national debt of the US government is $11.8 trillion and growing. Instead of the French dumping dollars, today our largest trading partner, the Chinese, don't want to hold dollars; they're converting theirs to gold. Because there is no longer a gold standard, they're buying gold on the open market. If they dump all of their dollars at once, the US economy will collapse. The petroeuro is now challenging the dying petrodollar to be the new exchange currency.[10]

Soon the dollar will be worthless and everyday Americans will suffer. The magic show is over, most just don't know it yet.

_____________________________

[1] "No Good Choices LBJ and the Vietnam/Great Society Connection," (pdf) Francis Bator, expanded version of a Presidents’ Week Lecture given at the American Academy of Arts and Sciences on February 28, 2006, p.14.

Bator was a deputy national security adviser to Johnson.

[2] Bator, Ibid., p.12.

[3] "The End of Dollar Hegemony," Speech by Congressman Ron Paul, February 16, 2006.

According to Paul:

"...elite money managers, with especially strong support from U.S. authorities, struck an agreement with OPEC to price oil in U.S. dollars exclusively for all worldwide transactions. This gave the dollar a special place among world currencies and in essence 'backed' the dollar with oil. In return, the U.S. promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite the radical Islamic movement among those who resented our influence in the region. The arrangement gave the dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as dollar influence flourished."

[4] The Hidden Hand of American Hegemony, David E. Spiro, Cornell University, 1999, p. 121.

William Clark summarizes:

"In 1974 the Nixon administration negotiated assurances from Saudi Arabia to price oil in dollars only, and invest their surplus oil proceeds in U.S. Treasury Bills. In return the U.S. would protect the Saudi regime. The purchases were done in relative secrecy and created the phenomenon known as 'petrodollar recycling.' "

[5] Petrodollar definition:

"A petrodollar is a dollar earned by a country through the sale of oil. In 1972-74 the US government concluded a series of agreements with Saudi Arabia to support the power of the House of Saud in exchange for accepting only US dollars for its oil. Saudi Arabia has been the largest oil producer and the leader of OPEC."

A December 2006 NY Fed article: "Recycling Petrodollars" explains how it works:

"A look at how oil exporters 'recycle' their revenues reveals that roughly half of the petrodollar windfall has gone to purchase foreign goods, especially from Europe and China, while the remainder has been invested in foreign assets. Although it is difficult to determine where the funds are first invested, the evidence suggests that the bulk are ending up, directly or indirectly, in the United States."

A pre-Iraq invasion article in The Observer, "When will we buy oil in euros?", explains the motivation of US government to use the military to pay for its profligacy:

"Oil trading, whether from Norway to the Netherlands, Britain to Bermuda, or Bahrain to Bangladesh, operates through the US greenback.

"The oil-dollar nexus is one of the foundations of the world economy that inevitably filters through to geopolitics. Recycling so-called petrodollars, the proceeds of these high oil prices, has helped the United States run its colossal trade deficits. But the past year has seen the quiet emergence of the 'petroeuro'.

"Effectively, the normal standards of economics have not applied to the US, because of the international role of the dollar. Some $3 trillion (£1,880 billion) are in circulation around the world helping the US to run virtually permanent trade deficits. Two-thirds of world trade is dollar-denominated. Two-thirds of central banks' official foreign exchange reserves are also dollar-denominated.

"Dollarisation of the oil markets is one of the key drivers for this, alongside, in recent years, the performance of the US economy. The majority of countries that require oil imports require dollars to pay for their fuel. Oil exporters similarly hold, as their currency reserve, billions in the currency in which they are paid. Investing these petrodollars straight back into the US economy is possible at zero currency risk.

"So the US can carry on printing money - effectively IOUs - to fund tax cuts, increased military spending, and consumer spending on imports without fear of inflation or that these loans will be called in. As keeper of the global currency there is always the last-ditch resort to devaluation, which forces other countries' exporters to pay for US economic distress. It's probably the nearest thing to a 'free lunch' in global economics."

The Saudis are the staunchest allies of the US government in OPEC:

" 'The Saudis are holding the line on oil prices in Opec and should they, for example, go along with the rest of the Opec people in demanding that oil be priced in euros, that would deal a very heavy blow to the American economy,' Youssef Ibrahim, of the influential US Council on Foreign Relations, told CNN.

"Last year the former US Ambassador to Saudi Arabia told a committee of the US Congress: 'One of the major things the Saudis have historically done, in part out of friendship with the United States, is to insist that oil continues to be priced in dollars. Therefore, the US Treasury can print money and buy oil, which is an advantage no other country has. With the emergence of other currencies and with strains in the relationship, I wonder whether there will not again be, as there have been in the past, people in Saudi Arabia who raise the question of why they should be so kind to the United States.' "

[6] "The End of Dollar Hegemony," Ibid.

Congressman Paul makes Bacevich's point, connecting the money system to its domestic effect--enabling businesses and everyday Americans to get something for nothing:

"Since printing paper money is nothing short of counterfeiting, the issuer of the international currency must always be the country with the military might to guarantee control over the system. This magnificent scheme seems the perfect system for obtaining perpetual wealth for the country that issues the de facto world currency. The one problem, however, is that such a system destroys the character of the counterfeiting nation’s people-- just as was the case when gold was the currency and it was obtained by conquering other nations. And this destroys the incentive to save and produce, while encouraging debt and runaway welfare.

"The pressure at home to inflate the currency comes from the corporate welfare recipients, as well as those who demand handouts as compensation for their needs and perceived injuries by others. In both cases personal responsibility for one’s actions is rejected."

[7] "Petrodollar Recycling And Global Imbalances," Presentation by Saleh M. Nsouli, Director, Offices in Europe International Monetary Fund, At the CESifo's International Spring Conference, Berlin, March 23-24, 2006.

Chart 7 from the presentation shows two sharp increases in the oil price of approximately 250% and 125% in the 1970s.

[8] "The Global Minotaur Or how the voracious US deficit causes wars, economic domination, and pushes ‘old’ Europe into an embrace with Peace activists," by Joseph Halevi and Yanis Varoufakis.

"The American quagmire in Indochina was giving rise to two antagonistic effects. On the one hand it was generating the quantitative conditions for global growth but, on the other hand, it was creating acute rivalries between the US and its two major protégés (Europe and Japan) in the context of the former’s balance of payments deficit and the ensuing pressure on the dollar.

"In his 1982 memoirs Henry Kissinger said quite categorically that the push to increase oil prices came from the US. It is now well accepted (see Oppenheim, 1976/7) that Kissinger’s memoirs impart quite accurately the manner in which US decision makers seized upon the OPEC-imposed embargo to push for a sharp increase in oil prices, well beyond OPEC’s planned price rises. The aim was to redress the balance of payments situation between the three major zones: the US, Europe and Japan. The basic assumption here was that, in the estimation of the US authorities, both Japan and Western Europe would find it much harder than the US to deal with a significant increase in oil prices."

[9] "The End of Dollar Hegemony," Ibid.

Congressman Paul gives examples of military intervention to defend dollar hegemony:

"In November 2000 Saddam Hussein demanded Euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat. At the first cabinet meeting with the new administration in 2001, as reported by Treasury Secretary Paul O’Neill, the major topic was how we would get rid of Saddam Hussein-- though there was no evidence whatsoever he posed a threat to us. This deep concern for Saddam Hussein surprised and shocked O’Neill.

"It now is common knowledge that the immediate reaction of the administration after 9/11 revolved around how they could connect Saddam Hussein to the attacks, to justify an invasion and overthrow of his government. Even with no evidence of any connection to 9/11, or evidence of weapons of mass destruction, public and congressional support was generated through distortions and flat out misrepresentation of the facts to justify overthrowing Saddam Hussein.

"There was no public talk of removing Saddam Hussein because of his attack on the integrity of the dollar as a reserve currency by selling oil in Euros. Many believe this was the real reason for our obsession with Iraq. I doubt it was the only reason, but it may well have played a significant role in our motivation to wage war. Within a very short period after the military victory, all Iraqi oil sales were carried out in dollars. The Euro was abandoned.

"In 2001, Venezuela’s ambassador to Russia spoke of Venezuela switching to the Euro for all their oil sales. Within a year there was a coup attempt against Chavez, reportedly with assistance from our CIA.

"The military might we enjoy becomes the “backing” of our currency. There are no other countries that can challenge our military superiority, and therefore they have little choice but to accept the dollars we declare are today’s “gold.” This is why countries that challenge the system-- like Iraq, Iran and Venezuela-- become targets of our plans for regime change.

"Ironically, dollar superiority depends on our strong military, and our strong military depends on the dollar. As long as foreign recipients take our dollars for real goods and are willing to finance our extravagant consumption and militarism, the status quo will continue regardless of how huge our foreign debt and current account deficit become."

[10] "Petrodollar or Petroeuro? A new source of global conflict," Cóilín Nunan, from November 2004 Feasta Review online.

"Were the euro to become a reserve currency equal to, or perhaps even instead of, the dollar, countries would reduce their dollar holdings while building up their euro savings. Another way of putting this would be to say that Eurozone countries would be able to reduce their subsidy to American consumption and would find that other countries were now subsidising Eurozone consumption instead.

"A move away from the dollar towards the euro could, on the other hand, have a disastrous effect on the US economy as the US would no longer be able to spend beyond its means. Worse still, the US would have to become a net currency importer as foreigners would probably seek to spend back in the US a large proportion of the estimated three trillion dollars which they currently own. In other words, the US would have to run a trade surplus, providing the rest of the world with more goods and services than it was receiving in return. A rapid and wholesale move to the euro might even lead to a dollar crash as everyone sought to get rid of some, or all, of their dollars at the same time. But that is an outcome that no-one, not even France or Germany, is seeking because of the huge effect it would have on the world economy. Europe would much prefer to see a gradual move to a euro-dollar world, or even a euro-dominated one."

The Limits of Power (Part 1)

In the US, many consider the "Department of Defense" a misnomer. For a country with troops in over 100 nations, "Department of Offense" seems more accurate. In truth, US military troops overseas aren't intended to defend America or Americans. Under the guise of defending America, they defend the fiat dollar. To actually defend America, a much smaller military would do.

In The Limits of Power: The End of American Exceptionalism, author Andrew Bacevich, a modern day Smedley (War is a Racket) Butler and Professor of International Relations at Boston University, predicts the end of the American Empire caused by a misguided foreign policy based on "an outsized confidence in the efficacy of American power as an instrument to reshape the global order."[1] Bacevich decries a US foreign policy that uses military power to prop up a financial system enabling continual overindulgence by Americans: what Bacevich calls "the crisis of profligacy."

In an August 15, 2008 interview by award winning journalist and former Johnson administration press secretary, Bill Moyers, Bacevich elaborated on "the crisis of profligacy":

BILL MOYERS: And this is connected, as you say in the book, in your first chapters, of what you call "the crisis of profligacy."

ANDREW BACEVICH: Well, we don't live within our means. I mean, the nation doesn't, and increasingly, individual Americans don't. Our saving - the individual savings rate in this country is below zero. The personal debt, national debt, however you want to measure it, as individuals and as a government, and as a nation we assume an endless line of credit.

As individuals, the line of credit is not endless, that's one of the reasons why we're having this current problem with the housing crisis, and so on. And my view would be that the nation's assumption, that its line of credit is endless, is also going to be shown to be false. And when that day occurs it's going to be a black day, indeed.

The Limits of Power Overseas

In The Limits of Power, Bacevich describes the folly of military officers and national security experts who propagate a fantasy of a military so powerful and with bombs so smart, that war is quick, clean, and effective.[2] A West Point graduate and 20-plus-years career soldier, Bacevich writes that:

"...events in Iraq and Afghanistan have demonstrated definitively that further reliance on coercive methods will not enable the United States to achieve its objectives."[3]

Now that Gen. Stanley A. McChrystal's "confidential memo" calling for more troops in Afghanistan has been leaked to the public, President Obama (D) would do well to listen to Bacevich:

"America doesn't need a bigger army. It needs a smaller- that is, more modest-foreign policy, one that assigns soldiers missions that are consistent with their capabilities. Modesty implies giving up on the illusions of grandeur... reining in the imperial presidents who expect the army to make good on those illusions. "[4]

The Limits of Power at Home

Bacevich wrote The Limits of Power before the 2008 election, but his logic applies to any administration. They all try to give Americans something for nothing, and fail miserably every time. Bacevich's description of the existing system in Washington, D.C. as a "gang that couldn't shoot straight" forecasts ominous prospects for the future of healthcare after it is re-formed by bureaucrats:

"Regardless of which party is in power, the people in charge don't know what they are doing. As a consequence, policies devised by Washington tend to be extravagant, wasteful, ill-conceived, misguided, unsuccessful, or simply beside the point. To cite examples drawn from just the past several years, think of the bungled efforts to 'reform' the Social Security and health care systems or to fix immigration policy. Think of the inanity of the never-ending 'war on drugs.' "[5]

Bacevich sees symptoms of American overindulgence in the trade imbalance in manufactured goods as Americans export fiat dollars and import manufactured goods (pdf). Bacevich calls the time from 1965 to 1973 a "tipping point" in American history, the start of an excessive consumption by Americans enabled by the US military presence overseas:

BILL MOYERS: You say in here that the tipping point between wanting more than we were willing to pay for began in the Johnson Administration. "We can fix the tipping point with precision," you write. "It occurred between 1965, when President Lyndon Baines Johnson ordered U.S. combat troops to South Vietnam, and 1973, when President Richard Nixon finally ended direct U.S. involvement in that war." Why do you see that period so crucial?

ANDREW BACEVICH: When President Johnson became President, our trade balance was in the black. By the time we get to the Nixon era, it's in the red. And it stays in the red down to the present. Matter of fact, the trade imbalance becomes essentially larger year by year.

So, I think that it is the '60s, generally, the Vietnam period, slightly more specifically, was the moment when we began to lose control of our economic fate. And most disturbingly, we're still really in denial. We still haven't recognized that.

Just as Bacevich predicts the end of the American empire caused by a misguided foreign policy based on force, I predict the end of the fiat dollar and our financial system caused by misguided domestic policies based on “an outsized confidence in the efficacy" of government power "as an instrument to reshape the domestic order." Policy experts, government bureaucrats, and profligate Americans, who want something for nothing, continue to believe an illusion of an all-wise and capable federal government with unlimited resources to solve all problems, despite all evidence to the contrary.

Let's see what happens when the "gang that couldn't shoot straight" gets its hands on healthcare "re-form."

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[1] The Limits of Power: The End of American Exceptionalism, Andrew Bacevich, Metropolitan Books, N.Y., N.Y., p. 7.

[2] Ibid. p. 127. Listen to any politician bloviate on strategy and you'll hear about "surgical strikes." E.g. This September 22, 2009 NY Times article, "Obama Strategy Shift in Afghan War," outlines V.P. Joe Biden's proposal, which is just what Bacevich is talking about:

"Mr. Biden proposed scaling back the overall American military presence. Rather than trying to protect the Afghan population from the Taliban, American forces would concentrate on strikes against Qaeda cells, primarily in Pakistan, using special forces, Predator missile attacks and other surgical tactics."

More current examples of defense policy experts: "So Who Were the Advisers for McChrystal’s 60-Day Afghanistan Review?" and "Meeting the Challenge: Time Is Running Out."

[3] Ibid. pp. 162-163. While Bacevich explicitly acknowledges the limits of coercive methods in the Middle East, and sees the flaws of the imperial presidency, he doesn't connect the dots and acknowledge that domestic coercion is an equally limited strategy. E.g. He concedes there are arguments with "indisputable merit" for a draft on page 155.

[4] Ibid. p. 169.

[5] Ibid. p. 71.

Deciding For Everyone

"My guiding principle is, and always has been, that consumers do better when there is choice and competition. That's how the market works." President Obama (D) in a joint session to Congress September 9, 2009

"The plan I announced will provide more security and stability to those who have health insurance. (Applause.) It will provide insurance to those who don't. (Applause.) And it will slow the growth of health care costs for our families, our businesses, and our government. (Applause.)" President Obama speech at a rally in Minnesota September 12, 2009

If only it were true Mr. President.

Bill Clinton smoked, "but didn't inhale," and George Bush didn't believe in "nation-building." Now Barack Obama promises us both a free market and a free lunch in healthcare with his promises to expand health insurance coverage and rein in costs. Does this President really believe it will be a free market with all the regulations being proposed?

The latest unrealistic promises are nothing new for the federal government, as Walter Williams explains in his September 2, 2009 column, "Washington Lies":

"At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee, along with President Johnson, estimated that Medicare would cost an inflation-adjusted $12 billion by 1990. In 1990, Medicare topped $107 billion. That's nine times Congress' prediction. Today's Medicare tab comes to $420 billion with no signs of leveling off. How much confidence can we have in any cost estimates by the White House or Congress?"

The President is concerned about the growth in healthcare spending. His solution is more regulation by the federal government. Contrary to what President Obama proposes, the market works when individuals decide what's best for themselves, not when the federal bureaucracy gets more and more involved controlling prices and deciding for everyone. Healthcare is in trouble now because of too much government intervention. Things won't get better when the federal government intervenes even more.

In their book, Patient Power, John Goodman and Gerald Musgrave describe what's wrong with third-party payers whether they are private insurance companies or the government:

"The central focus of third-party paying institutions is to eliminate 'waste.' Yet bureaucratic institutions (operating principally through reimbursement strategies chosen by people remote from actual patients and doctors) usually cannot eliminate waste without harming patients. Third-party payers may seek to eliminate waste by controlling price, or quantity, or both."[1]

A September 13, 2009 NY Times article about kidney recipient Melissa Whitaker, is an example of a third party payer's attempt to control the "waste" of excessive healthcare costs. In an attempt to control wasteful spending, Medicare limits anti-rejection drug coverage to three years after a transplant. Medicare paid for her first kidney transplant which cost over $100,000. Three years after her first kidney transplant, when the Medicare coverage limit expired, Whitaker couldn't afford to pay the approximately $17,000 to $36,000 per year on her own to continue taking her anti-rejection drugs. Eventually her transplanted kidney failed. Medicare then paid for dialysis for four years at $9,300 a month, more than three times the cost of the anti-rejection drugs, and paid $125,000 for a second kidney transplant.

Like the President, Whitaker looks to healthcare "reform" in Washington to solve the problem that occurred in her particular case. Like the President, she hopes more of the same will make things better--more government regulation, more bureaucratic third-party payment rules about what's best for the patient--the very things that contributed to her situation.

Hospital administrator Gabriel Vidal disagrees with the President's "more of the same" prescription, and points to the third-party payer as the problem:

"Unfortunately, since Obama uses faulty logic to diagnose the problem, his solutions will only make matters worse faster. The correct framework within which to diagnose the problem is to admit that costs are out of control because they do not reflect prices created by the voluntary exchange between patients and providers, between customers and producers, like every well-functioning industry."

President Obama believes that government knows best what everyone needs, so he would think the government should decide for everyone how the healthcare system should work. His healthcare "reform" means more third-party payers, more "Medicares," and more health insurance companies deciding what's best for patients. The authors of Patient Power explain why that is exactly the wrong thing to do:

"No one cares more about you and your family than you do. And the further removed decisionmakers are from you and your family--geographically, economically, and politically--the less likely they are to make the decision you would have made with your health care."[2]

The correct diagnosis for what ails our healthcare system is: third-party payers control medical decisions that should be between doctors and individual patients and their loved ones. President Obama has happily acknowledged that the government is very involved in healthcare and believes even more government involvement is a good thing. His ideal is a single third-party payer: the taxpayer. Many Americans recognize this and don't want the lives and health of their loved ones increasingly subject to politicians making medical decisions for them.

"I am not the first President to take up this cause, but I am determined to be the last." President Obama in a joint session to Congress September 9, 2009

If only it were true Mr. President.

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[1] Patient Power Solving America's Health Care Crisis, Goodman and Musgrave, Cato Institute, 1992, p. 23.

[2] Ibid. p. 33.

Teachable Moments

"...an important key to teaching children ethical behavior is learning to recognize teachable moments through which your children can develop the habit of being aware of ethical challenges." Steven Carr Reuben

On September 8, 2009, President Obama (D) gave a motivational speech to schoolchildren across America. Many Rs were unhappy that the President used his office to talk to school children. Do you think they were as upset when George H.W. Bush (R) addressed public school students on October 1991? Do you think Ds demanded a special GAO probe of President Obama as they did in 1991 when they ordered a special probe by the GAO in response to Bush's speech?

The President's message was one of personal responsibility. He called on students to stay in school and take personal responsibility for getting their education. The message was one that a parent might deliver to a child, and some parents were upset about the President assuming this role. A news commenter in this NBC video, revealed his bias, declaring that parents who were upset about Obama speaking to their public school children "aren't smart enough" to raise them. One thing is obvious, those parents aren't smart enough to realize that they're supposed to love Big Brother.

To help students benefit from an address by their leader, the Department of Education prepared an online letter with some classroom activities for school teachers about President Obama's speech. One of the Department of Education-prepared discussion questions (pdf) for pre-K through grade 6 students included these questions:

• Why is it important that we listen to the president and other elected officials, like the mayor, senators, members of congress, or the governor? Why is what they say important?

Both of these questions start with one extra word which prejudices the question, presenting a false choice to the student.

Department of Education discussion questions (pdf) for grades 7 through 12 included two questions that started with one extra word to prejudice the student by presenting a false choice again:

• How will he inspire us?
• How will he challenge us?

The following Department of Education discussion question stresses the apparent main point of the President's speech:

• We heard President Obama mention the importance of personal responsibility. In your life, who exemplifies this kind of responsibility? How? Give examples.

Here are some additional questions for parents and teachers to consider:

• What article in the US Constitution authorizes a department of Education?
• Where was "personal responsibility" when the President and Congress forced taxpayers to bail out the banks?
• Where was "personal responsibility" when the President and Congress forced taxpayers to bail out automakers?
• Where is the "personal responsibility" when the planned healthcare reform forces taxpayers to pay for all citizens to have health insurance?
• When the President ended his speech he said:

"I’m working hard to fix up your classrooms and get you the books, equipment and computers you need to learn."

Does he mean he's taking personal responsibility and spending his own money to pay for all the things a student needs to learn? Or was he channeling Ted Kennedy?

And finally, an extra credit question for all Americans:

How does President Obama inspire children to learn personal responsibility when the policies of his administration reward the irresponsibility of some at the expense of others?

Traveling Road Show

The purest form of democratic governing is practiced in a Town Meeting. In use for over 300 years and still today, it has proven to be a valuable means for many Massachusetts taxpayers to voice their opinions and directly effect change in their communities. Here in this ancient American assembly, you can make your voice heard as you and your neighbors decide the course of the government closest to you. Massachusetts Citizen's Guide to Town Meetings

During the August recess, members of Congress have been meeting with constituents. President Obama (D) pretends the meetings are town meetings:

"I know there's been a lot of attention paid to some of the town hall meetings that are going on around the country, especially when tempers flare."

Or did the President slip by conflating 'town meeting' and 'city hall'? 'Town meeting' as in a form of government where people meet locally to voice their opinions and vote directly on what the local government will be doing vs. 'city hall' as in "You can't fight city hall"?

Americans across the country have been vocally expressing their opposition to government healthcare (Youtube example). For daring to disagree, or for having the "audacity of hope" that they could actually get a Senator or Congressman to listen, Senate Majority Leader Harry Reid (D) "accused the protesters of trying to 'sabotage' the democratic process."

Nancy Pelosi (D) doesn't like listening to taxpayers disagree about government healthcare either. She thinks it is "un-American." In an OpEd piece, "'Un-American' attacks can't derail health care debate," written with House majority leader Steny Hoyer (D), they write:

"However, it is now evident that an ugly campaign is underway not merely to misrepresent the health insurance reform legislation, but to disrupt public meetings and prevent members of Congress and constituents from conducting a civil dialogue."

Pelosi and Hoyer explain that they will allow taxpayers to speak, but that the members of Congress are there to elucidate, not contemplate. Their minds are made up:

"This month, despite the disruptions, members of Congress will listen to their constituents back home and explain reform legislation. We are confident that our principles of affordable, quality health care will stand up to any and all critics."

So Americans who not only oppose a government plan, but who actually dare to speak their disagreement, are to be contemptuously thought of as saboteurs, disrupters, and un-American, according to Reid and Pelosi.

On August 14, 2009, an ABC News article goes even farther as it tried to preempt the debate, changing it to a battle of racists and hate groups opposing the forces of good:

"Experts who track hate groups across the U.S. are growing increasingly concerned over violent rhetoric targeted at President Obama, especially as the debate over health care intensifies and a pattern of threats emerges."

Perhaps if the traveling road shows were real town meetings where citizens actually had a say in the matter, things might be less antagonistic. Henry David Thoreau, speaking at an Anti-Slavery Celebration in Framingham, Massachusetts, on July 4, 1854 saw the value to be had in town meetings where local people governed themselves:

"When, in some obscure country town, the farmers come together to a special town-meeting, to express their opinion on some subject which is vexing the land, that, I think, is the true Congress, and the most respectable one that is ever assembled in the United States."

Instead today, citizens must swallow what they're fed or be criticized for having an independent opinion and daring to question their masters.

Similar frustration over powerlessness in America's past resulted in revolts in the 1770s and again a decade later in the 1780s. Both led to "real change" in government.

Tar and feathers anyone?