Drive Fast - Die Young

50 Signs That The U.S. Health Care System Is About To Collapse

by Michael Snyder

The U.S. health care system is a giant money making scam that is designed to drain as much money as possible out of all of us before we die.  In the United States today, the health care industry is completely dominated by government bureaucrats, health insurance companies and pharmaceutical corporations.  The pharmaceutical corporations spend billions of dollars to convince all of us to become dependent on their legal drugs, the health insurance companies make billions of dollars by providing as little health care as possible, and they both spend millions of dollars to make sure that our politicians in Washington D.C. keep the gravy train rolling.  Meanwhile, large numbers of doctors are going broke and patients are not getting the care that they need.

At this point, our health care system is a complete and total disaster.  Health care costs continue to go up rapidly, the level of care that we are receiving continues to go down, and every move that our politicians make just seems to make all of our health care problems even worse.  In America today, a single trip to the emergency room can easily cost you $100,000, and if you happen to get cancer you could end up with medical bills in excess of a million dollars.  Even if you do have health insurance, there are usually limits on your coverage, and the truth is that just a single major illness is often enough to push most American families into bankruptcy.

At the same time, hospital administrators, pharmaceutical corporations and health insurance company executives are absolutely swimming in huge mountains of cash.  Unfortunately, this gigantic money making scam has become so large that it threatens to collapse both the U.S. health care system and the entire U.S. economy.

The following are 50 signs that the U.S. health care system is a massive money making scam that is about to collapse...

#1 Medical bills have become so ridiculously large that virtually nobody can afford them.  Just check out the following short excerpt from a recent Time Magazine article.  One man in California that had been diagnosed with cancer ran up nearly a million dollars in hospital bills before he died...

By the time Steven D. died at his home in Northern California the following November, he had lived for an additional 11 months. And Alice had collected bills totaling $902,452. The family’s first bill — for $348,000 — which arrived when Steven got home from the Seton Medical Center in Daly City, Calif., was full of all the usual chargemaster profit grabs: $18 each for 88 diabetes-test strips that Amazon sells in boxes of 50 for $27.85; $24 each for 19 niacin pills that are sold in drugstores for about a nickel apiece. There were also four boxes of sterile gauze pads for $77 each. None of that was considered part of what was provided in return for Seton’s facility charge for the intensive-care unit for two days at $13,225 a day, 12 days in the critical unit at $7,315 a day and one day in a standard room (all of which totaled $120,116 over 15 days). There was also $20,886 for CT scans and $24,251 for lab work.

#2 This year the American people will spend approximately 2.8 trillion dollars on health care, and it is being projected that Americans will spend 4.5 trillion dollars on health care in 2019.

#3 The United States spends more on health care than Japan, Germany, France, China, the U.K., Italy, Canada, Brazil, Spain and Australia combined.

#4 If the U.S. health care system was a country, it would be the 6th largest economy on the entire planet.

#5 Back in 1960, an average of $147 was spent per person on health care in the United States. By 2009, that number had skyrocketed to $8,086.

#6 Why does it cost so much to stay in a hospital today?  It just does not make sense.  Just check out these numbers...

In 1942, Christ Hospital, NJ charged $7 per day for a maternity room. Today it’s $1,360.

#7 Approximately 60 percent of all personal bankruptcies in the United States are related to medical bills.

#8 One study discovered that approximately 41 percent of all working age Americans either have medical bill problems or are currently paying off medical debt.

#9 The U.S. health care industry has spent more than 5 billion dollars on lobbying our politicians in Washington D.C. since 1998.

#10 According to the Association of American Medical Colleges, the U.S. is  currently experiencing a shortage of at least 13,000 doctors.  Unfortunately, that shortage is expected to grow to 130,000 doctors over the next 10 years.

#11 The state of Florida is already dealing with a very serious shortage of doctors...

Brace yourself for longer lines at the doctor's office.

Whether you're employed and insured, elderly and on Medicare, or poor and covered by Medicaid, the Florida Medical Association says there's a growing shortage of doctors — especially specialists — available to provide you with medical care.

And if the Florida Legislature goes along with Gov. Rick Scott's recommendation to offer Medicaid coverage to an additional 1 million Floridians — part of the Affordable Care Act that takes effect next January — the FMA says that shortage will only get worse.

#12 At this point, approximately 40 percent of all doctors in the United States are 55 years of age or older.

Putting the human rights industry on trial

An explosive clash over a new bill has exposed how hostile ‘human rights’ are to freedom

by Nick Cater 

It is time we re-examined the legacy of the late Thumpa Sheil, the rabbit farmer and senator whose unfashionable views on Apartheid, fearlessly expressed, made him the the shortest-serving minister in Australia. Two days of notoriety in 1977 overshadowed Glenister Fermoy Sheil’s other contributions to civic debate, which is a pity, because Thumpa was nobody’s bunny. Over the course of his 13 years in Australia’s federal parliament, he was a net contributor of common sense.

His finest hour came when Gough Whitlam’s Labor government tabled the Racial Discrimination Bill in 1975. Even as the conservative opposition was preparing to bring down the government by vetoing the budget, it was too nervous to back its instincts and block Australia’s first human-rights legislation.

It was left to Thumpa, and a handful of other crazy-brave senators, to raise questions about the bill’s questionable constitutional validity and its threat to free expression. Only Thumpa and his backbench chums were prepared to defend the reputation of the Australian people, impugned by the tabling of legislation designed to cleanse society of ingrained racism.

‘The passage of this bill would take some fundamental rights away from us, such as the right of free speech, free discussion and publication’, Thumpa told parliament during the bill’s second reading speech. ‘Far from eliminating racial discrimination by making it illegal, the bill will highlight the problems between the races and create an official race-relations industry with a staff of dedicated anti-racists earning their living by making the most of every complaint in much the same way as does the Race Relations Board in the United Kingdom.’

‘This bill’, Thumpa continued, ‘will create yet another large and expensive federal government department. It will be headed by a race-relations commissioner with the status of a High Court judge and with powers similar to those used in the Spanish Inquisition.’

Trust Me, This Time Is Different

Well, not really

by Simon Black

By 1789, a lot of French people were starving. Their economy had long since deteriorated into a weak, pitiful shell. Decades of unsustainable spending had left the French treasury depleted. The currency was being rapidly debased. Food was scarce, and expensive.

Perhaps most famously, though, the French monarchy was dangerously out of touch with reality, historically enshrined with the quip, “Let them eat cake.”

The Bourbon monarchy paid the price for it, eventually losing their heads in a 1793 execution.  But it took the French economy decades to finally recover.

Along the way, the government tried an experiment: issuing a form of paper money. It didn’t matter to the French politicians that every previous experiment with paper money in history had been an absolute disaster.

As French Assemblyman M. Matrineau put it in 1790, 

“Paper money under a despotism is dangerous. It favors corruption. But in a nation constitutionally governed, which itself takes care in the emission of its notes [and] determines their number and use, that danger no longer exists.”

Translation: This time is different. We’re different. We’re smarter. We won’t suffer the same fate. TRUST US.

Within a few years, hyperinflation had taken hold in France. A measure of flour that sold for two francs in 1790 was selling for 225 francs by 1795. Everything soared. Carriage hires. Butter. Sugar. Everything.

Naturally, the French government decided to fix this problem by printing even more money, doubling the money supply from 7 to 14 billion units in a six-month period.

When these measures also failed, the French government imposed every control in the book– price controls, capital controls, information controls, people controls. They confiscated lands, they filled the prisons, they waged genocide against their own people.

History shows there are always consequences to entrusting a paper money supply to a tiny handful of men. The French experiment is but one example. Our modern fiat experiment will be another.

Like the French, our politicians think this time is different. Our central bankers think they’re smarter. And they want us to trust them. After all, what could go wrong?

Ben Bernanke, a man who has expanded the Federal Reserve balance sheet by nearly 300% during his tenure as central banker, just wrapped up Congressional testimony downplaying the risks of his own money printing:

“We do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery…”

It’s also quite interesting that the Federal Reserve Chairman is discussing the ‘stronger’ economy, especially when by the government’s own numbers, US GDP contracted in the 4th quarter of 2012. Meanwhile the price of everything from food to fuel keeps getting higher.

Simultaneously, politicians in the US are racing to avoid imminent ‘sequestration’ budget cuts. They’ve created a problem caused by excess spending, and their solution is to ensure they can keep spending.

The French were in the same boat in the 18th century. During the time of Louis XV, no one could imagine how French society could possibly function if they cut the welfare system or defense budget. So they kept spending… kept going into debt… and kept debasing the currency.

We know what happened next.

The US already must borrow money just to pay interest on the money they’ve already borrowed. The political elite is dangerously out of touch. This time is not different. Assuming otherwise is really dangerous.

Ghost Cities

Victoria's Secrets No More

By mark steyn

In a dispute between Hamas and Fatah, it's tempting to take the old Kissinger line re the Iran–Iraq War: It's a shame they can't both lose. But, in fact, only one side wins: In Gaza, al-Aqsa University has just announced that female students will be required to attend in proper Muslim garb from head to toe — i.e., the full body bag. At present, some still wear headscarf, trousers, and a long coat, but that's too revealing for the new Gaza, so time to get fitted for your burka, niqab, or abaya. Al-Aqsa University is funded by the Palestinian Authority — i.e., Yasser Arafat's old Fatah — but it's controlled by Hamas. The higher-education minister, Ali Jarbawi, fumed impotently from Ramallah that the new dress code is illegal and must not be implemented, but the hard men on the ground in the Gaza Strip regard him as just another irrelevant member of a shriveling personality cult for a dead kleptocrat with a taste for Aryan rent boys.

And so it goes across the region: Regimes that represented nothing but their Swiss bank accounts have fallen, and in their stead arises the only alternative — an Islam purified by decades in opposition to the secularists and distilled to a scorching 175 proof. What else is left?

Some years ago, for a telly documentary, the BBC sent the novelist Lawrence Durrell back to Alexandria, the setting of his eponymous Alexandria Quartet, his "prose poem to one of the great capitals of the heart." Durrell had lived in Egypt during the war years, and did not enjoy his return. "The city seemed to him listless and spiritless, its harbor a mere cemetery, its famous cafés no longer twinkling with music and lights," wrote Michael Haag in Alexandria, City of Memory. "His favourite bookshop, Cité du Livre on the rue Fuad, had gone, and in others he found a lamentable stock."

Only on the Western fringe of the Ummah, in a few Moroccan redoubts, can you still discern the flickers of the way it was. Otherwise, to anyone who knew the "Muslim world" of the mid–20th century, today's Maghreb and Levant are dull places, drained of everything but Islam. And Durrell was returning in 1977: Another third of a century on, and Alexandria's stock is even more lamentable. Indeed, his cast of characters would be entirely bewildering to contemporary Alexandrians: an English writer (of course), a Greek good-time girl, a homosexual Jew, a wealthy Copt. In the old days, Alexandria bustled with Britons, Italians, and lots and lots of Greeks. All gone. So are the Jews, homo- and hetero-, from a community 50,000 strong down to some four dozen greybeards keeping their heads down. I got an e-mail a year or so back from the great-grandson of Joseph Cattaui, a Jew and Egypt's finance minister back in the Twenties: These days, the family lives in France — because it's not just that in Egypt a Jew can no longer be finance minister, but that in Egypt a Jew can no longer be. Now, in the absence of any other demographic groups to cleanse, it's the Copts' turn to head for the exits — as in Tripoli and Benghazi it's the blacks'. In the once-cosmopolitan cities of the Arab world, the minority communities are confined to the old graveyards, like the rubbish-strewn Jewish cemetery of broken headstones, squawking chickens, and hanging laundry I wandered through in Tangiers a while back. Islam is king on a field of corpses.

Nowadays, for the cosmopolitan café society Durrell enjoyed, you have to go to the cities of multicultural Europe, where "diversity" is not a quirk of fate but the cardinal virtue. At Westminster, the House of Commons has just voted in favor of same-sex marriage. Almost simultaneously, a group calling itself the Muslim London Patrol posted a YouTube video of its members abusing a young man for "walking in a Muslim area dressed like a fag." Another Londoner is made to empty his beer can: "No drink in this area." An insufficiently covered woman is warned, "This is not so Great Britain. This is a Muslim area."

The "moderate Muslim" Maajid Nawaz writes in the New York Times that his youthful European-born coreligionists, back from Islamic adventuring during the Arab Spring, are anxious to apply the lessons learned abroad. The Danish group Kaldet til Islam (Call to Islam) has introduced "Sharia-controlled zones" in which "morality patrols" of young bearded men crack down on underdressed and bibulous blondes. In the Balearic Islands, Muslims took against the local meter maids, and forced the government to withdraw them. In Dagenham, 20-year-old Naomi Oni, a black Londoner, suffered horrific burns after a woman in a niqab hurled acid in her face. She was returning home from her job at Victoria's Secret. Not secret enough.

Meanwhile, the BBC reports that February 1 was the first World Hijab Day, in which non-Muslim women from 50 countries took a stand against "Islamophobia" and covered themselves to show how much they objected to society's prejudice against veiled women. From Gaza to Alexandria to Copenhagen to London, I don't think we'll have to worry about that. As Balthazar, Durrell's homosexual Jew, muses, "Narouz once said to me that he loved the desert because there 'the wind blew out one's footsteps like candle-flames.' So it seems to me does reality" — for the footsteps of Copts in Egypt, meter maids in Majorca, and Victoria's Secret clerks on the streets of the East End.

Bubble trouble

Is there an end to endless quantitative easing?

by DETLEV SCHLICHTER

The publication, earlier this week, of the Federal Reserve’s Federal Open Market Committee minutes of January 29-30 seemed to have a similar effect on equity markets as a call from room service to a Las Vegas hotel suite, informing the partying high-rollers that the hotel might be running out of Cristal Champagne.  Around the world, stocks sold off, and so did gold.

Here is the sentence that caused such consternation:

“However, many participants also expressed some concerns about potential costs and risks arising from further asset purchases (the Fed’s open-ended, $85 billion-a-month debt monetization program called ‘quantitative easing’, DS). Several participants discussed the possible complications that additional purchases could cause for the eventual withdrawal of policy accommodation, a few mentioned the prospect of inflationary risks, and some noted that further asset purchases could foster market behaviour that could undermine financial stability.”

Here is how one may freely translate it: “Guys, let’s face it: All this money printing is not without costs and risks. Three problems present themselves: 1) The bigger our balance sheet gets (currently, $3 trillion and counting), the more difficult it will be to ever load off some of these assets in the future. When we start liquidating, markets will panic. We might end up having absolutely no maneuvering space whatsoever. 2) All this money printing will one day feed into higher headline inflation that no statistical gimmickry will manage to hide. Then some folks may expect us to tighten policy, which we won’t be able to do because of 1). 3) We are persistently manipulating quite a few major asset markets here. Against this backdrop, market participants are not able to price risk properly. We are encouraging financial risk taking and the type of behaviour that has led to the financial crisis in the first place.”

All these points are, of course, valid and excellent reasons for stopping ‘quantitative easing’ right away. Readers of this site will not be surprised that I would advocate the immediate end to ‘quantitative easing’ and any other central bank measures to artificially ‘stimulate’ the economy. In fact, the whole idea that a bunch of bureaucrats in Washington scans lots of data plus some anecdotal ‘evidence’ every month (with the help of 200 or so economists) and then ‘sets’ interest rates, astutely manipulates bank refunding rates and cleverly guides various market prices so that the overall economy comes out creating more new jobs while the debasement of money unfolds at the officially sanctioned because allegedly harmless pace of 2 percent, must appear entirely preposterous to any student of capitalism. There should be no monetary policy in a free market just as there should be no policy of setting food prices, or wage rates, or of centrally adjusting the number of hours in a day.

Raise Middle Class Taxes Now!

Conservatives and liberals are both in the business of spreading illusions

by Mario Rizzo

I now favor expiration of the Bush era tax rates for everyone.  Why? Because the only way to curb spending in the long run is to make as large a number of Americans as possible truly feel the consequences of the expenditures they appear to desire.

If Americans saw the cost of the gigantic welfare state in their paychecks, they would, I am confident, radically re-evaluate the expenditure side of the situation we are in. Then when someone comes up with a genius idea for spending, the people would think: Is it worth higher taxes? Might I not spend it better on my family, my church – or even – on… champagne?

I realize that there are all sorts of imperfections in my idea. For example, if I am a large farmer with much to gain in subsidies, I can get the subsidies for a fraction of the cost in my taxes. Furthermore, the opportunity costs of government programs are not always correctly measured by their monetary costs. And so forth.

But there is a fundamental point here for liberals and conservatives alike: Let’s make the costs of our “generosity” clearer. Let us make the costs of fighting foreign wars more nearly explicit.

Neither conservatives nor liberals want this. They are each in the business of spreading illusions, albeit about different things.

Where is the honesty, where is the justice, in spending through trillion dollar deficits? 

Frankly, I have no patience with the Keynesians and fellow-travelers who conveniently argue that we cannot do this now because the economy is weak. It is never time for them. But if they insist, let us agree on a date certain for the change. The date they give us will reveal something about them.

But I have another idea in the interim.  Let us require, by law, that the taxpayer be simply informed on his pay stub of the amount of withholding that would occur if all government expenditures were fully funded by taxes.

Further, I have no patience with conservatives who know that, under the present system of political- incentives, there is little chance of meaningful expenditure reform. These incentives must be changed.

Finally, I have no patience with the” Ricardian equivalence” economists who argue that people rationally expect and incorporate in their decision-making the present value of all the future interest payments on the debt. In their minds, people already incorporate the costs of big expenditures into their economic decision-making.  I do not know first-hand just how good or how shaky the evidence is. 

I think almost all economists would say that it may work to explain some data but clearly does not work across the board. There is a subtle, but elementary problem here: Hardly anyone really believes that this cost is explicit in voters’ minds. It is just an instrumental assumption that may perhaps rationalize data of a certain sort.  

Let us perform an experiment. Let’s see if explicit taxes restrain government more than as if taxes. We can help settle a debate in macroeconomics as well as in political economy.

The most important argument against my proposal is that the relatively few innocent people who never wanted the state we have will get hit with higher taxes.  Yes, this is terrible. All I can say is that this proposal may be our last best hope for change. Forgive me. 

The True National Debt

You'd think this would be an easy question

By Robert Samuelson

Surely we know how much the government owes. Unfortunately, it's not that simple. The true national debt could be triple the conventional estimate, anywhere from $11 trillion to $31 trillion by my reckoning. The differences mostly reflect explicit and implicit "off-budget" federal loan guarantees. In another economic downturn, these could result in large losses that would be brought "on budget" and worsen already huge deficits. That's the danger.

 My purpose is not to scare or sensationalize. It's simply to illuminate the problem. Broadly conceived, the national debt covers all debts for which the federal government assumes final responsibility. For politicians, the appeal of "off-budget" programs is that they allow the pleasure of spending without the pain of taxing. But they also create massive exposure for government.

Let's see why. Below are five estimates of the national debt. I compare each with our national income (gross domestic product), which is the economic base to service debts. In fiscal 2012, GDP was $15.5 trillion. Some economists say a debt ratio exceeding 90 percent slows economic growth. The United States already exceeds this threshold on four of my five measures.

(1) TREASURY DEBT HELD BY THE PUBLIC: $11.3 trillion, 73 percent of GDP for fiscal 2012. This is the most common measure of the national debt. Reflecting past annual deficits, it represents what must be borrowed through sales of Treasury bills, notes and bonds. In 2007, the figures were only $5 trillion and 36 percent of GDP. Today's levels -- as a share of GDP -- are the highest since World War II's immediate aftermath.

(2) GROSS FEDERAL DEBT: $16 trillion for 2012, 103 percent of GDP. This definition includes the "debt held by the public" (above) plus the Treasury securities issued to government trust funds, the largest being Social Security. Economists dislike this debt concept, because the trust-fund Treasury securities represent one part of the government owing another. It's comparable to lending yourself money. Congress could cancel these debts, though it almost certainly won't. The trust-account Treasury securities represent political commitments more than financial obligations.

(3) FEDERAL LOANS AND LOAN GUARANTEES: $2.9 trillion in 2011, 19 percent of GDP. The government makes or guarantees loans to college students, farmers, veterans, small businesses and others. The face value of most of these loans don't show up in the budget, but the government is on the hook if borrowers default. Adding this debt (19 percent of GDP) to gross federal debt produces a total debt ratio of 122 percent of GDP.

(4) FANNIE AND FREDDIE: $5.1 trillion, 33 percent of GDP. The government wasn't legally required to cover the debts of these "government sponsored enterprises" -- the major lenders to the housing market -- but almost everyone assumed it would if they got in trouble. That happened in September 2008. With Fannie and Freddie, the total debt ratio rises to 155 percent of GDP.

(5) THE FEDERAL DEPOSIT INSURANCE CORPORATION: $7.3 trillion, 47 percent of GDP. That's the insurance protection on bank accounts up to $250,000. Including the FDIC brings the total debt ratio grows to 202 percent of GDP.

So the most expansive measure of national debt ($31 trillion) is nearly three times the conventional estimate ($11 trillion). Almost all the items on my list -- whether Treasury bonds or bank deposits -- are ultimately legal obligations of the federal government. Note: They differ from Social Security and Medicare benefits, which are often called "debts." They aren't. Congress can alter the benefits anytime it chooses.

Now let me add some less alarmist qualifications.

First, some federally backed credit programs confer huge benefits. The FDIC's insurance prevented a depositors' panic in the financial crisis. It also has a $25 billion insurance fund to cover payments. Second, most federally backed credit goes to private borrowers who should be able to repay. Lax credit standards may produce some defaults, but in normal times they should be a tiny fraction of the total. Usually, these programs aren't a major drain on taxes. By contrast, borrowing to cover budget deficits is not automatically self-liquidating.

The rub is that we don't live in "normal times," as that term was used. Credit expanded on the upbeat belief that steady economic growth, marred only by modest recessions, would enable most debts to be serviced. The financial crisis and Great Recession demolished this permissive presumption. As the slump deepened, off-budget commitments became on-budget costs. Bank rescues swamped the FDIC's resources; mortgage losses impelled the Fannie and Freddie takeovers.

Something similar could happen again. A deep downturn could cause a cascade of defaults on "off-budget" guarantees that require on-budget bailouts. The lesson: We should reject new off-budget commitments and curb some that already exist.

Hollande in denial

France to pause austerity, cut spending next year instead

By Geert De Clercq

France will not introduce any further austerity measures this year but instead focus on spending cuts in 2014 to bring its deficit down to three percent of GDP that year, French President Francois Hollande said on Saturday.
The Europe-wide economic slowdown has forced France to delay its target of cutting the state deficit to three percent of GDP this year and the government has said it does not want to impose too much austerity on an economy near recession.
"It would be wrong to take measures that put another brake on consumption and investment," Hollande said at the annual Paris farm show on Saturday. "There is no need to add more austerity in 2013. A lot has already been asked of the taxpayer."
He added that while government efforts to reduce the deficit had until now consisted of more tax increases than spending cuts, that trend would be reversed in 2014.
Finance Minister Pierre Moscovici said on Friday that France would ask its EU partners and the European Commission for an extra year to cut its public deficit below a targeted 3 percent of GDP, and would outline new savings measures soon.
Hollande said his government had brought down the deficit from 5.2 percent of GDP at the end of 2011 to 4.5 percent in 2012. The European Commission expects a French 2013 deficit of 3.7 percent of GDP.
"I admit it is not the three percent, but the movement is going in the right direction, as both the France national audit office and the European Commission recognize," he said.
Spending cuts in 2014 would be made in the state budget, local budgets and the social security budget, Hollande said, reiterating that the government maintained its longer-term goal of a zero deficit in 2017.
Holland said France would continue to try and boost growth through public investment, notably with funds gathered through tax-free savings books and by state investment companies.
But he was downbeat about jobs, saying that if economic growth in 2013 was not better than the 0.1 percent the European Commission expects, unemployment would rise further.
"But if forecasts for one or 1.2 percent growth in 2014 materialize, we will see new job creation again," he said.
He said his cabinet would focus on jobs for young people.
"When youth unemployment rates in some countries are above 50 percent, 25 percent in France, there is a risk of explosion, and I do not want to jeopardize national cohesion" he said.
He said his government expects a report on pension reform to be completed this summer.
That will be followed by talks between unions and employers with a view to implementing pension reforms in 2014.

Too Big Νοτ To Fail and the wrong size of the Nation-State

The State has monopolized all authority, giving it essentially unlimited power to make things worse

by Charles Hugh-Smith

I recently came across this excerpt from Preparing for the Twenty-First Century by Paul Kennedy (1993):

The key autonomous actor in political and international affairs for the past few centuries (the nation-state) appears not just to be losing its control and integrity, but to be the wrong sort of unit to handle the newer circumstances. For some problems, it is too large to operate effectively; for others, it is too small. In consequence there are pressures for the "relocation of authority" both upward and downward, creating structures that might respond better to today's and tomorrow's forces of change.

Though Kennedy (author of Engineers of Victory: The Problem Solvers Who Turned The Tide in the Second World War and The Rise and Fall of the Great Powers) is focused on geopolitical issues, this inquiry into the right and wrong sort of unit sizes appropriate to the challenges we now face also raises the larger question:

What if it's not just nation-states that are the wrong sort of unit, but also "too big to fail" banks, ObamaCare, the global corporation and every other large-scale, centralized organization?

ObamaCare: The Neutron Bomb That Will Decimate Employment (February 22, 2013)

Correspondent Mark G. stated the resulting hypothesis very succinctly: "We are exiting the era when large economic entities were the dominant form of human social organization."

If the Central State and the global corporation are losing integrity and control, it is not due to bad policy or mismanagement; more profoundly, they are the wrong unit size to address the emerging era's problems.

The State is too large to address most problems (actively making problems worse via Central Planning), and too small to address global challenges. The global corporation is too large to address the 90% of human life that isn't terribly profitable, and too small to resolve the implosion of the debt-dependent Status Quo.

A Godly Man in an Ungodly Age

The Secular City seems to have triumphed over the City of God

by Patrick J. Buchanan

 “To govern the bark of Saint Peter and proclaim the Gospel, both strength of mind and body are necessary, strength which in the last few months, has deteriorated in me to the extent that I have had to recognize my incapacity to adequately fulfill the ministry entrusted to me.”

With those brave, wise, simple words, Benedict XVI announced an end of his papacy. How stands the Church he has led for eight years?

While he could not match the charisma of his predecessor, John Paul II, his has been a successful papacy. He restored some of the ancient beauty and majesty to the liturgy. He brought back to the fold separated Anglican brethren. The Church is making converts in sub-Saharan Africa. And in America, new traditionalist colleges and seminaries have begun to flourish.

That is looking back eight years. Looking back half a century, to that October day in 1962 when Pope John XXIII declared the opening of Vatican II, the Church appears to have been in a decline that, in parts of the world, seems to be leading to near extinction.

At Vatican II, the Rev. Joseph Ratzinger, the future Benedict XVI, was among the reformers who were going to bring the church into the modern world. The encounter did not turn out well.

In 1965, three in four American Catholics attended Sunday mass. Today, it is closer to one in four. The number of priests has fallen by a third, of nuns by two-thirds. Orders like the Christian Brothers have virtually vanished. The Jesuits are down to a fraction of their strength in the 1950s.

The Federal-State Crack-up

The Trojan Horse of Cooperative Federalism

By MARIO LOYOLA

For decades, Democrats and Republicans alike have invested heavily in governance schemes that erode the Constitution’s separation of powers and mar its proper functioning. The Federal judiciary has uniformly rubber-stamped these schemes. The consequence has been an unsustainable spree of borrowing, spending and overregulation at the Federal level, cyclical fiscal crises at the state level, and less accountable and less representative government at every level.

These governance schemes are generally of two kinds: one erodes the separation of powers between Federal and state governments, while the other erodes the separation of powers within the Federal government. In the first category is “cooperative federalism”, whereby the Federal government uses monopoly powers to coerce and subvert the prerogatives of state governments. In the other is Congress’s delegation of vast rule-making authority to administrative agencies.

These two categories of concern are often treated as being entirely distinct, but they share profound similarities. Both are methods for Congress to escape accountability by hiding its power in other institutions of government. Cooperative federalism allows Congress to hide its power within the decision-making of state governments, while its delegation of rule-making authority allows it to hide its power in the far-flung bureaucracy of the Executive Branch.

The Federal judiciary has a crucial role to play in maintaining and policing the boundaries of America’s basic institutions of state. It is a role it abdicated when confronted with the popular nationalist programs of the New Deal. The constitutional doctrines the judiciary has invoked to let Congress blur these critical separations of power are deeply flawed as a matter of constitutional law, and they have ultimately become unsustainable as a matter of political economy. Federal courts must begin to enforce a strict separation of powers, both between the Federal and state governments and within the Federal government itself. And Congress itself must start undoing the consequences of its own self-indulgence.

There are two main species of cooperative federalism. The first is Federal assistance grants such as Medicaid, in which Congress gives money to state governments on condition that their programs comply with Federal preferences. The second is cooperative regulation, in which the Federal government allows states to implement Federal regulations themselves, also on condition that they meet certain requirements (known as “conditional preemption”).

Both sound nice, but both violate the principle of federalism in the Constitution, under which states are declared sovereign and the powers of the Federal government are specifically enumerated and correspondingly limited. Both allow anti-competitive political cartels in Congress to strangle innovation and regulatory competition at the state level by using the federal machinery to impose an uncompetitive policy baseline on everybody.

At the Supreme Court, federalism has staged a promising comeback, though it is still little more than a rear-guard action. The Court ruled inGarcia v. San Antonio Metropolitan Transit Authority (1984) that the limits on Congress’s power to control state governments depend on the national political process itself—in other words, on Congress’s self-restraint. Backing away from this dangerous idea, two crucial cases of the Rehnquist Court established the blanket principle that the Federal government cannot command state governments to do anything.

Prosperity's timeless sources – Part IV

Mobility, talent and capital

By Reuven Brenner 

Human creative sparks are always there, probably randomly distributed around the world. Prosperity, though, is due not to new ideas but the commercialization of new ideas. And the incentives to commercialize ideas depend on accountable government and accountable, deep matchmaking in financial markets - call the latter "democratized" capital markets. 

The great advantage of such markets is that they decentralize decision-making and prevent mistakes from lasting too long. Thus, when small-scale enterprises meet financial tests, they gain greater access to capital markets and expand. If they fail, the loss to society is much smaller than it is in the case of failed grandiose government-sponsored projects. 

The latter must be grandiose to escape accountability, so that by the time they are finished, the politicians who started it are either dead or long out of office, calmly collecting extravagant pensions and other benefits. 

Continued spending on such projects is justified by a large army of government-sponsored economists and statistical bureaus, parts of the priesthood of our times, who never fail to come up with half-baked theories of market failures to be remedied by - hold your breath - who else, but the smart, altruistic, government regulators and bureaucrats. The result of this myth-creation is that more good money is being thrown after bad. 

Economists in the future may estimate exactly how much of the US economy since World War II can be attributed to the large movement to its shores of extremely skilled, ambitious, well-connected people from around the world, a world that until 10 years ago was hostile to initiative and hope. 

Then we will know how much the transfer of this unmeasured human capital helped cover for many costly and mistaken US government policies. Whether or not recent observations, such as Robert Gordon's on the pages of the Wall Street Journal, about the slowdown in rates of innovation in the US are already detecting the slowdown due to the diminished movement of the "vital few" to the US, or even reversing it (as recently documented by the outflow of the skilled of Asian origins back to their home countries), or the slowdown is happening due to the diminished incentives of financing start-ups - time will tell.

Prosperity's timeless sources – Part III

Uniqueness of the Scottish miracle

by Reuven Brenner 

The Scottish lesson, rarely mentioned in history books, shows what else can be behind economic miracles other than the factors - migration of hard-working, skilled people, stable money and significantly lower taxes - indicated in the second part of this series. 

Scotland in 1750 was a very poor country. The land was of poor quality, and illiterate people engaged in near-subsistence agriculture; there were no navigable rivers; barren mountains and rocky hills hindered communication. The main export at the time was processed tobacco. Yet, less than a century later, Scotland stood with England at the forefront of the world's industrial nations. Its standard of living was the same as England's, whereas in 1750 it was about half. How did the Scots do it? 

The Union of 1707 made Scotland part of England. It came under England's system of taxes, laws and currency and was allowed access to English markets - a mini version of the later European common market. 

The union also abolished the Scottish parliament, leaving Scotland without a distinct administration until 1885. That turned out to be the biggest blessing (reminding one of Hong Kong's later success under distant British rule: no democracy there, but the closest approximation of low, flat taxes, a stable currency and open, but held accountable, financial markets), as it prevented the banking system and financial markets from becoming an instrument of government finance. The result was a financial market that developed in response to the demands of the private economy. 

By 1810 there were 40 independent banks. The orthodoxy of the times held that banks should lend only if the loans were backed by the security of goods in transit or in process, and for no more than 90 days. In contrast, the Scottish banks were free to lend for unspecified periods of time with no requirement to be backed by securities. Briefly: the Scottish banks offered the precursors of junk bonds, venture capitalists, and perhaps "angel investing". 

Bills of exchange, the main assets of banks in other countries at the time, were the least important ones for the Scottish banks. The largest volume of loans was made to manufacturers and merchants, who got credit backed only by their own signature with two or more people as sureties. The banks flourished with tiny reserves (1% of liabilities in specie), and irregular financial reports (annual balance sheets were prepared starting only in 1797). 

The Scottish financial historian, A W Kerr, captures the specific feature of the country's financial markets:

Prosperity's timeless sources – Part II

The myth of government aid

By Reuven Brenner 
Historians and economists, most heavily subsidized, are very good at creating and perpetuating mythologies serving their financial masters. At times the myths are about nationalism, falsely suggesting that economic miracles have been due to the genius of people living within arbitrary national borders. At other times they are about the extremely beneficial roles of foreign aid. 

The post-World War II West Germany miracle fits more the pattern of being brought about by incentives and a large population influx of "vital fews", though in popular memory its success is associated more with the US's Marshall Plan. Taking a closer look though, the impact of that aid has been greatly exaggerated. 

Economists have estimated that from 1948 to 1950 Marshall Plan aid amounted to between 5% and 10% of European gross national product (GNP), though one must be extremely skeptical of these high numbers. European statistics - in fact, all statistics everywhere following wars - were characterized by rationing, price controls and extensive black markets. The mismeasurement has the effect of overestimating the Marshall Plan's impact. 

There were, after all, no miracles in Europe after World War I, when aid and loans to Europe were also estimated to amount to about 5% of its GNP. True, the world moved toward lowered tariffs after World War II, which it did not after World War I. One inference would seem to be that miracles may be linked with lowered tariffs rather than foreign aid. Such inference though does not play well for politicians and local interests wedded to territory. 

So what fueled the West German miracle? From 1945 to 1961, Western Germany accepted 12 million, for the most part, well-trained immigrants. About 9 million were Germans from Poland and Czechoslovakia. Others fled East Germany's communist paradise. 

Although the movement of that capital did not appear at the time on the books, its importance can be inferred from the significantly higher ratio of working persons to total population in West Germany than in other countries in the 1950s and 1960s: 50% in Germany versus 45% in France, 40% in the UK, 42% in the US and 36% in Canada. 

Prosperity's timeless sources - Part I

Facts behind miracles

By Reuven Brenner 

Politicians and economists promise growth, prosperity and higher standards of living. What do they mean by these terms? 

Are there good, relatively objective measures by which to judge whether people in a country expect technological and political innovations (including fiscal ones) to be beneficial and lead to the creation of more wealth? How can we be sure that a financial innovation, a change in company strategy or a change in government policy makes a society better or worse off? 

The answer is that changes in the total market value of firms (value of stocks added to the value of outstanding debt) in a society added to the value of its governments' outstanding obligations would be the best estimate to make such judgment - once financial markets are well-developed, and institutions exist to hold matchmakers, be it in finance or government, accountable. 

Then, when this sum increases, it means that the society's ability to generate revenues and pay back debt - whether private or public - has increased. And the contrary: when this sum drops (measured it terms of a relatively stable unit, rather than a particular currency), people signal that either their governments or the companies' management are making - or persisting longer than expected - with erroneous decisions. 

The reason is simple: holding matchmakers in financial markets and governments accountable mitigate the magnitude and persistence of mistakes. By so doing they bring faster the better matching of capital and talent. 

When the aforementioned sum diminishes, where does the wealth go? That depends. 

The smaller is capital's and people's ability to move, the more the diminished value becomes a permanent loss. Those things that are expected to be solid - people's efforts and ingenuity - melt into thin air. More mistakes are made and they are expected to last longer. The decrease reflects diminished expectations of generating future revenues (since every mistake is a cost). Yet, generating future revenues is what "growth" and the ability to pay back debt means. 

When capital and people can move, though, the wealth that disappears in one country reappears in others. 

There are few better examples to illustrate these points than the wealth created by the various diaspora - Armenian, Chinese, the Huguenots, Jew - as well as the poorer immigrants of Europe, who built the newer continents. (Few of the rich left Europe. The emigrants were driven out of their homelands by politics and regulations). Let us briefly look in the first part of this series at how the movement of the most gifted and energetic of those people led to many of the world's economic "miracles". 

The Cinderella stories of poor or impoverished societies suddenly and quickly leapfrogging others have provoked admiration, envy, and intense discussions about why the outdone stumbled, and the humbler rose. The riches of oil-producing Middle East countries do not provoke such discussions because those countries fit the "finding treasure" pattern. But how do societies do it when they not only lack natural resources, but are even endowed with natural disasters? Can other countries emulate them and achieve similar degrees of prosperity?