April 12, 2010
Inflating Government Bubble Can Only Lead to a Major Financial Hangover 

By Peter D. Schiff, Contributing Writer, Money Morning
During the 1990s, the inflationary policy of the U.S. Federal Reserve fueled a tech-stock bubble. When that bubble burst, the Fed inflated a larger one in real estate. Now that the real estate bubble has burst, the Fed is inflating the biggest bubble of them all - a bubble in government.

While the earlier booms provided at least the illusion of prosperity - as well as some fun while they lasted - the government bubble will cripple the economy and deliver widespread misery to the vast majority of Americans.

Of course, there will be winners in the government bubble - at least for a while. As was the case with the stock and real-estate bubbles, plenty of money will be made by the well-connected and parasitic classes. Government employees will continue to enjoy pay raises at our expense, as will anyone benefiting from the new wave of subsidies, such as Wall Street investment bankers, financial speculators, and those working in healthcare or education.

These gains will come at the expense of the taxpayers who foot the bill and the consumers who face higher prices. As government grows, it "crowds out" the private sector, depriving it of the resources it needs to survive and grow.

The result is a lower overall standard of living.

Not only are government jobs less productive than private sector jobs, but bureaucratic interference actually makes the remaining private sector jobs less efficient, as well.

Our economy is being transformed from a mostly capitalistic one to a mostly socialistic one. More decisions are being made by politicians and lawyers in Washington and fewer by entrepreneurs. The motivation behind this shift is the mistaken belief that the financial crisis of 2008 was caused by too much capitalism and a lack of proper government oversight.

This conclusion is self-serving for those in power, and couldn't be more economically misguided.

Through corruption or just plain ignorance, Congress and the Obama administration have embraced an ideology that has failed every time it has been tried.

Take the recent student loan reforms that were slipped into the healthcare bill. U.S. President Barack Obama wants to reduce the cost of providing student loans by taking the profits out of the industry. According to President Obama, student loans are too expensive because banks profit from making them. If the government nationalizes the function, we would apparently bring down costs by eliminating those pesky profits.

This is a Marxist argument, pure and simple. If true, it would apply to all industries, not just banking. States like Cuba and North Korea would be the envy of the world, as they prohibit profits across the board. The truth is that profits - earned from free-market competition - keep cost down. By taking the profits out and putting the bureaucrats in, any incentive to provide better service or lower costs is eliminated. It's not hard to predict that student-loan costs will now rise faster than ever.

That is clearly not the result we want. To solve the problem, people must understand that college tuitions are so expensive specifically because the government has guaranteed student loans. Guaranteed loans don't mean more access to education, but rather that universities are free to charge more per pupil than if their customers were paying out-of-pocket.

President Obama's plan only serves to remove more market forces and creates an even bigger moral hazard. Under the new rules, students will be required to repay a much smaller portion of what they borrow. As a result, students will be willing to borrow even greater amounts of cash to pay inflated tuitions, making it that much easier for colleges and universities to raise them.

Also, since the government will actually be loaning the money directly - rather than simply guaranteeing private-sector loans - the U.S. Treasury will actually have to borrow the money itself before it can re-lend it to students. I suppose the irony of going into debt to loan money never registers in Washington. Further, as this bill will cause tuitions to rise even faster, it will necessitate even larger loans that will produce even greater taxpayer losses when the loans end in default or forbearance.

Whether it is in education, housing, healthcare, automobiles, insurance, or banking, greater government involvement in the economy means higher prices, lower productivity, more bailouts, bigger deficits, increased taxes, diminished industrial capacity, fewer private-sector jobs, less freedom, and a falling standard of living.

In the end, when runaway inflation and skyrocketing interest rates burst the government bubble, there will be no more bubbles to replace it - just one hell of a hangover.

More employers starting wellness plans

By John Schmid of the Journal Sentinel

Posted: April 13, 2010 |(10) Comments

Amid the din of the nation's health policy debate, one trend seems clear: More employers are adopting corporate programs to assess healthiness, promote wellness and ultimately reduce the cost of medical insurance.

"They do it because it's working," Michael Bolger, president of the Medical College of Wisconsin, said in an interview Monday. Bolger, who spearheaded a three-year effort to win Milwaukee's designation as a "Well City USA," said the increase has become self-evident as insurance costs have continued to rise around the country.

Milwaukee won the designation last month because a growing number of employers such as Northwestern Mutual, Joy Global Inc. and PyraMax Bank have adopted wellness policies. The Wellness Council of America, a nonprofit organization, awarded the designation after the city was able to show that 30% of its working population is employed at organizations that offer wellness programs.

Wellness policies differ from company to company. But nearly all include a health assessment that quizzes employees on lifestyle habits, exercise, nutrition, stress, smoking and alcohol. Without assessments, most Americans would not bother to think about their risk profile, said David Hunnicutt, president of the Wellness Council of America.

"The vast majority of working people in this country have no idea what their health status is," Hunnicutt said in an interview.

Hunnicutt arrived in Milwaukee Monday ahead of a speech he delivers to business leaders Tuesday morning at the Pfister Hotel.

Other features include tracking of biometrics, such as blood pressure, weight, heart rate and cholesterol, he said, adding that employers are required to keep the results confidential. Most corporations also have health coaching or activities as well as incentives to exercise or quit smoking, he said.

Wellness programs have existed for 25 years but only recently began to gain traction as employers struggle with rising health insurance costs. The United States stands alone amid advanced industrialized nations as a country where medical insurance is provided by employers, not government systems.

But at $2.6 trillion annually, U.S. health costs lead the world as a percentage of national economic output, Hunnicutt said. At 16% of gross domestic product, "we spent two times as much as any other industrialized nation in the world," he said.

Wellness programs, however, are meant to reduce risk and change lifestyle habits, which in turn reduce the number of insurance claims and slow the rise in annual premium increases. "For every dollar that companies invest in workplace wellness programs, they'll see on average about a $3 return on investment in the form of lower health care costs, reduced absenteeism, increased productivity and lower disability," Hunnicutt said.

The wellness designation helps polish the city's image, said Janet McMahon, executive director of Well City Milwaukee, a coalition led by the Metropolitan Area Chamber of Commerce, the Greater Milwaukee Committee and the City of Milwaukee.

"Milwaukee is not a rusty beer and brats city any longer," McMahon said.

Only six cities have a Well City USA designation. Asked why so few cities participate in a program that has existed for 25 years, Hunnicutt said the idea was ahead of its time:

"To be right too soon is to be wrong," he said in an interview.

Obamacare Creates Windfall for Drug Companies 
Posted by Dr. Mercola | April 22 2010

[img_r]http://media.mercola.com/imageserver/public/2010/April/4.22windfall.jpg[/img_r]The healthcare bill may soon be creating even more profits for the pharmaceutical companies, thanks to a change in the tax code that affects flexible spending accounts (FSA) or health savings accounts (HSA).

Consumers can use these pre-tax accounts to pay for eligible health care expenses -- expenses that used to include over-the-counter medications. Under the new healthcare bill, however, only prescribed medications will be covered. As written in Newsmax:

Section 9004 of the Senate bill the House as well as Section 531 of the House bill that passed in November, changes the tax code so that distribution for medicine from HSAs and FSAs are qualified only if for prescribed drug or insulin.

Yes, the bills are merciful enough to allow diabetics to purchase insulin under these tax plans, but if you or your family members need Pedialyte, prenatal vitamins, or numerous other OTC health items, you will see a tax hike that could be huge.

Since HSAs and FSA contributions are exempt from both income taxes and 15.3 percent payroll tax for Social Security and Medicare, and since these together can reach more than 40 percent of an employees salary, the effective tax increase on these medicines could be more than 40 percent.

And this tax change will almost certainly cost the healthcare system billions more dollars in unnecessary spending both to the government and private insurance plans.

This is only one aspect of the healthcare bill that could end up costing the government more money. According to Robert J. Samuelson in the Washington Post, the plan may also trigger a budget crisis. He writes:

Two weeks before the House vote, the Congressional Budget Office released its estimate of Obama's budget, including its health-care program. From 2011 to 2020, the cumulative deficit is almost $10 trillion. Adding 2009 and 2010, the total rises to $12.7 trillion.

In 2020, the projected annual deficit is $1.25 trillion, equal to 5.6 percent of the economy (gross domestic product). That assumes economic recovery, with unemployment at 5 percent. Spending is almost 30 percent higher than taxes. Total debt held by the public rises from 40 percent of GDP in 2008 to 90 percent in 2020, close to its post-World War II peak.

Sources:
Washington Post March 29, 2010
Newsmax March 23, 2010

Dr. Mercola's Comments:


The Affordable Health Care for America Act could cost the U.S. nearly $2 trillion over the next 10 years. When added into the Congressional Budget Offices latest budget estimates from 2009 to 2020, the total budget rises to $12.7 trillion!

So what exactly is affordable about that? You may have heard reports that the new health care bill will actually reduce the deficit by $143 billion over the next 10 years.

Even if this is true, it is still only a fraction of the overall costs of the plan, and, as the Washington Post reported, amounts to only about 1 percent of the projected $12.7 trillion deficit from 2009 to 2020.

So what is all of this spending going to get you? What will it mean for your health and that of your family?

Who Will Benefit from the New Health Care Bill?

Will all of this spending result in stellar health for every U.S. citizen? Unfortunately not. The United States already has the most expensive health care system in the world,

The U.S. spends more than twice as much on each person for health care as most other industrialized countries. And yet it has fallen to last place among those countries in preventing avoidable deaths through use of timely and effective medical care.

That the system is fatally flawed and in need of a radical overhaul is self-evident, but now, written into the new health care bill, are subtle changes that will end up costing taxpayers even more money, all while encouraging the use of expensive and dangerous prescription drugs.

How?

Since over-the-counter medications are no longer qualified items for HSAs and FSAs, it will actually be less expensive for many people to see a doctor and be prescribed a drug then it would be to purchase a drug over-the-counter.

John Berlau said it well in Newsmax:

OTC drugs are much cheaper [than] those available for prescription, but they could now be more expensive to individual consumers given that prescription drugs would still be eligible for favored treatment in the tax plans, and that insurance companies would be mandated to cover many of them.

Consequently, any time a consumer has the slightest headache, the financial incentive would often be to see a doctor and get a prescription rather than go to the store and get medicine off the shelf.

This could mean that billions will be wasted on the additional costs for prescription drugs in instances when OTC medicines could be just as safe and effective at treating the illness.

Drug Companies Will Get Richer

There should be no doubt about the power the drug industry wields in shaping the US health care system, and they undoubtedly made sure the new plan would continue to shower them in profits.

Big pharma has been the driving force behind conventional medicine, and the beneficiaries of exploding health care costs, for well over a century, and there are no signs that the current health care reform will change any of this.

On the contrary, this new legislations is specifically designed to continue to feed the beast.

The new health care bill actually provides incentives for people to purchase more expensive prescription drugs in favor of their less expensive over-the-counter cousins.

What is Missing From the Health Care Reform Bill?

Drug companies, by and large, are not here to bring health to the population but to scam them on one level for vast amounts of money, by treating the symptoms and not addressing the cause.

And a health care system that continues to buy into this methodology, which focuses on drugs and surgical interventions instead of valuing your bodys innate ability to heal when given proper nutrition and a healthy lifestyle, will ultimately fail you.

Where, instead, is the debate about limiting unnecessary, ineffective treatments and stopping fraud? Why is no one talking about the fact that there are effective, inexpensive natural-based alternatives?

These are the discussions that could actually make Americans healthier but the fact of the matter is that the Big Pharma Cartel has a supreme hold over our government, and this is, most likely, why you do not see any discussions about these very real, underlying problems -- and why the drug companies, not you or your familys health, will be the primary beneficiaries of the new health care reform.

As long as your focus is on drugs and surgical interventions, you will never see the fundamental changes that are so desperately needed. It can only be accomplished by a radical change in how you, and how society as a whole, think about health.

And this change can only be accomplished one person at a time. The goal is to have a critical mass of people refuse the unnecessarily dangerous and counterproductive solutions currently offered by conventional medicine. That will serve as the powerful stimulus to generate authentic change in the system.