Kirk Adams is a small businessman and supporter of SBABG’s mission.  He is running for Congress to represent Arizona’s 5th Congressional District.  We are excited to see him take on the entrenched Washington insiders.  We need more small businessmen to run for office!

His opponent, Washington insider Matt Salmon, has been attempting to reinvent himself as a small government conservative.  Adams is taking him to task (see full video below). After a decade of lobbying for energy mandates, public employee unions, and crony capitalist projects, Salmon finally moved back to Arizona (from Washington), bought a cowboy hat, and is attempting to reacquaint himself with some conservative principles (such as don’t give money to liberal candidates like Ed Pastor and Joe Baca).

Yesterday, in pursuit of his new image, lobbyist Salmon released an opinion piece condemning congressional insider trading.  He’s right, politicians should never use their positions to enrich themselves, whether it’s through insider trading while in office or through lucrative lobby…err…other careers once they leave office.

What made his piece laughable is the fact that Salmon personally donated money liberal Congressman Ed Pastor, who was featured last month in a New York Times article about–you guessed it–congressional insider trading!

“When Ed Pastor was first elected to congress two decades ago, he was comfortably ensconced in the middle class.  Mr. Pastor, a Democrat from Arizona, held $100,000 or so in savings in the mid-1990s and had a retirement pension, but like many Americans, he also owed nearly as much in loans.  Today, Mr. Pastor, a miner’s son and a former high school teacher, is a member of a not-so-exclusive club:  Capitol Hill millionaires.”

So, what gives?  The Kirk Adams for Congress campaign asked Arizona voters, “Why would a former Republican U.S. congressman, turned lobbyist, donate money to a liberal Democrat campaign.” A few answers:

“They would give money to any campaign that served their particular needs.”

“Wasn’t principled in the first place and now he’s out for the money.”

There sure is something fishy about Matt Salmon.

So who is right? Will these bills potentially hurt open content creation online? Or will they still allow creative content, but truly stop violations of copyright laws? It is hard to know without looking at the wording of the bill itself. It is a bit daunting to read a bill and try to understand its wording.

Luckily Sal Khan from the Khan Academy has made a video walking through some of the wording in the bill that has raised the most concern. He puts it into language that is easy to understand. It gives a clear picture of the possible problems that could arise if these bills pass as they stand January 18, 2012.

Click on the link below to watch the video and tell us what you think. Don’t forget to tell your elected representatives how you feel as well.

SOPA and PIPA Explained

Here are some definitions of Big Government from a few online dictionaries.

“Government perceived as being excessively big-spending and attempting to control too many aspects of people’s lives.” MSN Encarta

“Government that seems to have too much control over people’s lives.” Macmillan

“Any government wielding excessive control over its citizens or interfering with their lives.” Dictionary.com

You see the themes – control, interference, wasteful, big-spending.

That’s true, of course, but we’d like to be a little more specific and thought-provoking in our definition.

Big Government, in its most raw form, is a group of individuals that through coercion turns human beings into either beasts of burden or perpetual children.

It is that group which preaches entitlement over responsibility, dependency over self-sufficiency.  It purports that people are incapable of caring for themselves through free and voluntary choices, and therefore must be coerced into “doing the right thing.” It prevents human beings from being fully actualized, keeps them in a form of subjection and – in its most extreme form – slavery.

Does it do this deliberately and willfully?  Not in the beginning.  Isabel Paterson, in her book The God of the Machine, said:

“Most of the harm in the world is done by good people, and not by accident, lapse, or omission. It is the result of their deliberate actions, long persevered in, which they hold to be motivated by high ideals toward virtuous ends… …[W]hen millions are slaughtered, when torture is practiced, starvation enforced, oppression made a policy, as at present over a large part of the world, and as it has often been in the past, it must be at the behest of very many good people, and even by their direct action, for what they consider a worthy object.”

Even the alleviation of suffering, so long as it is done through plundering third parties, will result in more total suffering induced than ever relieved.  The total amount of suffering in the world cannot be reduced by forcing one group of human beings to relieve it in the way the tyrant desires.  The tyrant’s coercion makes more of mankind miserable, turns them away from productive endeavors.  In its extreme forms, Big Government paradoxically kills innocents in order to save lives.

Seen in this way, Big Government can either be a Tyrant or a Nanny, or a combination of both.  Either it enslaves you and coercively makes you work on its behalf, or it “protects” you from yourself, restricting your freedom while promising to care for your every need, in exchange for your agreement to keep it in power.

Either way, it treats you as either an animal to be burdened, or a scolded child to be suckled forever at its teat.

How you are treated often depends on whether or not you are willing to keep the ruling cadre in power.  If you do, you may lose your freedom but win the privilege of being coddled.  If you don’t, you may lose your freedom and be burdened.

So Big Government divides people into two groups: one group is the animals burdened with the task of producing the mothers milk forever; the other is that group which forever – or so it’s promised – drinks the mothers milk.

Now, in pointing this out, we’re not talking about any specific group that is favored by government and eats from the labor of others, we’re talking about all such group, from bailed out banks and companies, to subsidized farmers, to protected unions, to groups that benefit from tariffs, to the ever-growing unproductive government bureaucracy; in short, any form of corporate or public dependency program.

One of the central features of Big Government is that it encourages bad behavior in order to remain in power.  It bails out those who have made bad decisions in order to gain their support.

The individuals that comprise Big Government, of course, play god, determining which group of human beings will be the beasts of burden, and which will be the bailed out, dependent children.

Over time, people learn that it does not pay to behave responsibly.  In fact, the consequences for poor judgment will be so lessened as to have no moral authority over behavior.  People learn that they can live life however irresponsibly they want and some one else will be forced to pick up the tab … that is, until there’s no one left with any money or productive resources.

At that point, the system collapses soviet-style.  The beasts of burden decide that it’s easier to be suckled infants and then there are no longer enough producers to support the dependents.

One interesting phenomenon that we have noticed over the past decades is how Americans have behaved regarding debt and savings, and how the past decisions they made are now affecting them.

Look at what has happened in the U.S. over the last few decades.

This first graph shows the U.S. Savings rate (what percentage of their incomes Americans saved) over the past 50 years.

Notice that, for whatever reason, over the last 30 years people have been putting less and less money away for a rainy day.

Now, look at this graph of household debt as a percentage of disposable income over the last 30 years.

Despite saving less money, people are using more borrowed money to support their lifestyles, especially over the last decade.

Low savings rate + high and increasing debt load = people living beyond their means

At some point, the gig is up.

Now, look at this graph of the number of food stamp recipients over the last decade.  In the decades prior to 2000, the number of food-stamp recipients had been trending down.

So here’s the questions:

Are these events merely correlated or is there an element of causation?  That is, do government bailout promises encourage people to not take responsibility for their own lives, to prepare for “unforeseen” – yet predictable – misfortunes in the future?

Understand that we’re not arguing for or against this particular social program, just merely asking questions about whether or not Government Dependency Programs create Moral Hazard.

What do you think?  Do government handout programs enable bad behavior?

Does the knowledge that someone will be there to give you food, coupled with the knowledge that the government has the capacity to forever force someone else to pay for your livelihood, make you take less responsibility for your own well being, live on borrowed money, not save for a rainy day?

By asking these questions, of course we’re not advocating for letting the hungry starve.  We advocate for the support of voluntary charities, and lots of it, and we believe that each of us has a personal responsibility to responsibly care for the poor among us in ways that do not create dependency and thereby rob recipients of their dignity.

If you reward bad behavior, you’ll get more of it.  If you punish responsible behavior, you’ll get less of it.

Big Government must be opposed.  If we don’t oppose it immediately, over time in its most extreme forms it reduces people to animals or infants.

As Cato’s Letter #38 taught:

“What is government, but a trust … which ought to be bounded with many and strong restraints, because power renders men wanton, insolent to others, and fond of themselves.”

So what can you do? 

Sign up for our RSS feed and become a fan of our Facebook Page. We’ll continually send you information about how you can help keep government in its place.

Then, Join DownsizeDC.org and participate in it’s campaigns.  It takes less than five minutes per day, and you just participate in the campaigns you like.  In our opinion, it is the best project around for reducing the size and scope of Big Government.

originally published May 21, 2010.

Complexities in the code and a labyrinth of rules to obtain credits mean tax compliance costs are unacceptably high for small businesses.

Small businesses want simplicity in the tax code and they want rates for individual taxpayers kept low. Close to 75 percent of small businesses pay tax on their business income at the individual level, making it imperative that the 2001 tax cuts be made permanent.

Unduly burdensome regulations disproportionately affect the small-business community costing them around 36 percent more per employee than their larger counterparts.

In FY 2010, federal agencies unleashed 43 major new rules’  and the costs of implementing these rules was $28 billion.

According to the Congressional Budget Office, the budget deficits in 2009 and 2010, as measured as a share of GDP, were the largest since 1945. They represent almost 10 percent of the GDP and the estimated budget deficit for 2011 is going to stay in that range.

On one hand, the whole notion of earmarks and pork barrel spending encourages many impractical pet projects from doofy legislators. To see their ban would send a message to the fiscally irresponsible politicians, on both sides of the aisle, who misuse (our) federal tax dollars. On the other hand,eliminating 100 percent of earmarks in fiscal 2010 would have cut the federal budget by less than one-half of one percent.  In other words, earmarks are close to the least of our worries.

She’s actually mistaken, and she’s making a common mistake because she doesn’t understand the role earmarks play in the legislative process.  They are a lever whose spending impact is far greater than what they appear to be.

Look at this issue from another angle.  For just .5% of government spending, why is there such resistance from Congressional Leadership (on both sides of the aisle) against getting rid of them?  That’s the question to ask.  Once you ask it and look closely, you see why.

Earmarks are an effective tool to manipulate Congressional voting blocks.

Take “Legislation A” that does not stand-alone well and cannot muster majority support.

Then take “Project B” that a single legislator wants in his district.  It favors one group of people (say, a state or city) at the expense of all others.  As a stand-alone project B could never pass legislatively if introduced alone.

You’d think that because the legislation and the project don’t stand well on their own that combining them would also result in something that doesn’t stand alone well.

You’d be wrong.

What if I told you that the way Congress does business now often leads to Legislation A passing while (and because) it includes project B?

It happens all the time and earmarks are what makes it possible.

Congressional Leadership can pass legislation that otherwise could not garner a majority if they will throw in pet projects (in the form of earmarks) to buy votes.  See, they are giving a bribe to a legislator so that the legislator can go back home and tout the fact that his district got project B funded and put in place (a targeted benefit) while refusing to call attention to the bad legislation they passed (a dispersed cost).

When costs are dispersed but benefits targeted, that’s where corruption and vote buying will most emerge and where special interests most come to play.

So – because of earmarks – you end up with the combination of bad legislation that includes bad and wasteful projects.

Votes are bought through earmarking grants.

It’s like logrolling, but unlike traditional logrolling, it’s a crack-cocaine version …

Without earmarks big, bad, costly legislation is less able to be forced through.

Get rid of earmarking, and you get rid of the “lever” through which some of our worst legislation has been passed.

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The six steps are a pattern to follow when talking with others about a proposed Big Government program.

The steps are predicated on helping others who naively support Big Government programs see that these Big Government programs don’t work because they can’t work.

If you want to change hearts and minds – and that’s what we’re trying to do – step one is the most fundamentally important to ensure that steps 2-6 are most effective.

The six steps are:

1. Empathize with the person’s (or program’s) positive intentions

2. Explain that Big Government programs don’t work

3. Provide evidence that Big Government programs often make things worse for the very people they’re intended to help

4. Show that Big Government Programs create new problems

5. Teach that Big Government Programs are wasteful and costly

6. Explain that Big Government programs divert money and energy from positive and productive uses

We’ve used this formula for years and it works.  It changes hearts and minds.  Most people are reasonable and respond to such, but they’ve been conditioned  – usually through mind-numbing public education programs taught by people who eat at the government trough -  to believe that government is inherently good, efficient, and the cure for all ills that ail mankind.

The example below shows how we can apply the six steps to help a friend who cares deeply for the suffering sick and so – as conditioned – invariably thinks the solution is to be found in the establishment of a Big Government program.  Where we’re employing each of the six steps I’ve noted the corresponding step below (in parenthesis).

–

FRIEND: “I just think everyone should have health insurance and that sick people should be able to get medical treatment even if they can’t pay for it.  No one should have to suffer without health care.  So I support government run health care.”

YOU: (1) “I think it’s great that you want to see sick people get the help they need.  Like you, I want to see sick people get the treatment they need.  I also don’t want to see people suffering and I think all of us should be concerned and feel for people who are in need.  And I think that there are things that can be done to help people get more insurance coverage and needed health care.

(2) But the question is, can government actually do this or will it just make things worse? – It seems that the evidence is very strong that historically government programs intended to help with health care have not worked. Just took at the government’s Medicare program, which was established to provide health care to older people.  Medicare started in 1965, just 44 years ago.  And already, the program has cost more than ever expected and hasn’t really helped out people the way it was intended. According to the Social Security and Medicare Board of Trustees, Medicare is predicted to go bankrupt by 2017.

(3)  All those people who have been paying in will have nothing unless other, non-retired people start paying drastically more money into the system just to pay for the people on it now – money that they themselves will then not receive when they retire.  How does a system that takes people’s money for 44 years, then goes bankrupt and leaves them with no services, help people?

(4) What do we do about these new problems the program created?  A whole bunch more people dependent on government and no money to pay for it.  And the government took their money in the form of a Medicare tax so they don’t even have that money now in their retirement to pay for their own health care.

(5) The thing is, government always significantly underestimates its own costs.  Whether they do it deliberately or not isn’t important; they’re just not a good source for honest analysis.  Did you know the following?

In 1967, the House Ways and Means Committee predicted that Medicare would cost $12 billion in 1990. In reality, the program cost over $110 billion in 1990.

In 1987, Congress estimated that the Medicaid Special Hospitals Subsidy would reach $100 million in 1992. The actual cost exceeded $11 billion.

In one case, Congress underestimated costs by 10 times.  In the other case they underestimated costs by 110 times!

The truth is that government has proven itself incapable of predicting costs or staying within budget, and that’s why all their programs are going bankrupt and leaving people worse off.

Despite the government’s best intentions, it can’t take care of people.  By trying to do so it’s bankrupting us all.  More government programs will just mean we’ll be bankrupt that much more quickly.

(6) Just think where we could have been right now if government hadn’t taken all that money away from people and wasted it.  The people it took from could have saved their money and taken care of their own post-retirement health needs.  They would have known it was their responsibility to save for it rather than being dependent on a government that wasn’t there for them.

What we need to do is get government out of the health business.  We need lower taxes so that people can keep more of their own money.  We need to keep government out of our lives so that an economic climate favorable for job creation can take root.  After all, having a job is the #1 way to get health care and health insurance, since either you’ll have money to purchase a policy or pay directly for health care or your employer will do it for you.  Having a paycheck is the best way to build up a savings for your own retirement health-needs.

A low tax environment means that businesses can also create more jobs because they have more resources to work with – resources that haven’t been confiscated by the government.

The truth is, if we really care for the poor, the elderly, the needy, we will oppose government getting involved since it just makes their – and everyone else’s – situation worse.  In fact, Big Government policies actually create more neediness and dependency by confiscating so much of people’s hard earned property and handing it to wasteful bureaucrats.

We can take responsibilities in our families and local communities to help one another, to help our friends and neighbors.  By turning over this responsibility to the government, we lose the opportunity to really help them and instead leave them in a position of being dependent on an entity that will ultimately abandon them.”

–

And that’s it.  This approach can be done for other big issues such as:

The Poor (how Welfare and the resulting Dependency keeps peopel poor)

The War on Drugs (how Prohibition doesn’t work and leads to Violence and Dangerous Black Markets)

Bailouts (they create Moral Hazard and the Too Big to Fail Mentality means that failing businesses are allowed to parasitically live off the productive ones)

Education (Public Education’s Failure to improve education despite ever increasing levels of spending)

–

We’d really encourage you to take a little time and think through this and prepare to be able to help others understand the truth about Big Government and how it hurts them.  Also consider picking up the book, Secrets of Libertarian Persuasion. (Disclosure: if you click on that link and buy the book, we get a small kickback from Amazon.com, which we’ll plow back into marketing the group to more people).

In the comments below, please take shot at a way to do the above with other important topics.  By sharing your thoughts below it will help all SBABG members to create better narratives that we can share with others.  What do you think?  What are your ideas?

The bill is currently on the desk of Governor Schwarzenegger, and he has until October 11th to sign it into law, or veto it.

We circulated the notice to CA members and encouraged them to contact the Governor and encourage a veto, but thought we’d also share it here on the SBABG blog so that others might share it with their contacts in California.

The right to bear arms, protected by the second amendment, doesn’t just mean the right to bear guns, but also to bear ammunition.  This bill creates burdensome and discriminatory regulations against some citizens by making it harder to obtain the means to defend themselves.

This regulation will drive up the cost of self-defense by reducing distribution efficiencies – thereby reducing supply and driving up cost – and likely lowering the distribution of ammunition amongst law-abiding citizens because of the difficulty of obtaining it.

Online and catalog handgun ammunition sales have helped to drive down the cost of ammunition and, therefore, the cost to arm and defend oneself.  This trend will be reversed if AB 962 is signed into law.

Since handguns are not hunting guns, but self-defense weapons, it means that the cost to defend oneself will increase.

This legislation also directly damages small businesses by not only imposing compliance costs on them, but disallowing many small businesses from selling ammunition online or through catalogs, as they’ve done for years.

Politicians think this measure will keep ammunition out of the hands of criminals, but it won’t. The gangs and cartels already have their black-market supply lines and unlimited access to ammunition.  Moreover, California cannot prevent criminals from going to another state to purchase ammunition and crossing state lines.  And forensics cannot match particular bullets to particular ammunition sales and get the criminals name and address.

This bill will merely hurt law-abiding citizens who do comply with law.

If you wish to comment on AB 962, you may contact Gov. Schwarzenegger by phone at (916) 445-2841, or via fax at (916) 558-3160. To e-mail Gov. Schwarzenegger, visit http://gov.ca.gov/interact

*The SBABG member forwarded us the following information about AB 962:

Among other regulations, AB 962 would:

• Ban all mail-order and Internet sales of handgun ammunition.

• Prohibit the retail sale, the offer for sale or the display of handgun ammunition in a manner that allows ammunition to be accessible to a purchaser without assistance of a vendor or employee.
• Require that the delivery or transfer of ownership of handgun ammunition occur in a   face-to-face transaction, with the deliverer or transferor being provided bona fide evidence of identity of the purchaser or other transferee.

That evidence of identity, which must be legibly recorded at the time of
delivery, includes:

• The right thumbprint of the purchaser or transferee.
• The date of the sale or other transaction.
• The purchaser’s or transferee’s driver’s license or other identification number and the state in which it was issued.
• The brand, type and amount of ammunition sold or otherwise transferred.
• The purchaser’s or transferee’s signature.
• The name of the salesperson who processed the sale or other transaction.
• The purchaser’s or transferee’s full residential address and telephone number.
• The purchaser’s or transferee’s date of birth.

Over the last few weeks Congress and the Administration have been trying to call government takeover of health insurance and health care “competition”.  They have hijacked words and are using them in completely new ways to try and trick people into believing they are selling something they’re not.

The expansionist and interventionist nature of Big Government means that it always has as its goal to set up Monopsonies (single payer systems in which they control the production of goods and services) or Monopolies (single provider systems in which they control the provision of goods and services).  They try to do it in the name of “competition” as if they actually plan on competing fairly (if at all) with the private businesses and charities they’re trying to muscle out of a market.

Battles against Big Government are often won or lost over whether or not we are willing to concede the actual terms of the argument to Big Government, or whether we’ll refuse to conduct the argument with Big Government’s terms.  Below are a few examples of how we can change the terms and, therefore, how people feel about Big Government’s activities.

“Revenue” vs. “Confiscation”

Here’s a glaring example.  Big Government calls taxation by the name of “Revenue”. The agency in charge of collecting taxes is even called the Internal Revenue Service (IRS).

Set aside whether or not it’s technically correct or not or has become such through use of the word for a long time, “revenue” is a business word.  That’s our word. That’s the word for sales – the free market exchange of goods and services between voluntary parties who are both made better off by the trade.  Revenue is something freely given for something of value freely received. Taxation is coercion and wealth confiscation by force.

At the very least, we should refuse to grant taxation legitimacy by calling it that.  Moreover, revenue is a “positive” word that government has hijacked.  When our goal is to reduce the size and intervention of Big Government, why would we ever concede to use words that might grant Big Government any semblance of legitimacy?

While taxation is an OK word to use when talking about the means through which Big Government finances itself, it is one that has become desensitized and still does not make strongly enough the central point that it is coercive.

So we propose to use the word “confiscation” instead.  When discussing our opinions with friends, family, employees and co-workers, we would say, “I think government confiscates too much,” or “Government confiscated 10% more of our private property this year than they did last year.”

“Earnings” vs. “Private Property”

Notice that in the statement above we used the word “private property” instead of “earnings.”

“Earnings” actually should be a pretty good word to use because it implies that what is taken from people is something they’ve earned, or labored for, but this word has also been used for so long that people have become desensitized to it.

How about talking about confiscation in terms of “private property“?

Also, how about talking about the confiscation of private property in terms of “productive people” or the “productive sector” funding the “unproductive people” or “unproductive sector”?  Big Government, after all, merely redistributes the confiscated property of productive people, so let’s call it what it is.

“Welfare” vs. “Dependency Programs”

We talk about Government “Welfare” programs in language that implies they help others “fare” more “well”. We even use terms such as “Charity” or “Entitlement” to talk about these Big Government Programs. While it is true that some of these programs can provide temporary relief to those in need, the full truth is that they often create permanent dependencies and reward dependents for inactivity and bad behavior.

Furthermore, private charities (which have to compete for donations) are far more efficient at helping those in need and suffer when Big Government confiscates more private property to itself, rather than allowing those resources to be employed by the more efficient and accountable charitable organizations.

So, instead of calling these programs “welfare programs,” we can call them by the more accurate terms, “Government dependency programs” or “Government handout programs.”

Then we could say things like, “Government dependency programs confiscated 10% more private property from the productive sector” or “Government handout programs saw their rolls grow by 5% in the last quarter.”

That helps others see the truth about Big Government.

Big Government not only uses words to justify its big programs, but it also selects words that can be used to silence dissent and opposition to the programs. Think about the “Patriot Act.” It has nothing to do with being a patriot, but by using that name anyone who opposes the act it can be labeled “not a patriot.”  Cunning.   If you oppose “No Child Left Behind” you can be labeled as someone who does not support helping children succeed.  Think about the Medicare Prescription Drug Improvement and Modernization Act.  Nothing was improved or modernized so much as spending was drastically increased – the biggest Government Dependency Program expansion in decades.  But if you didn’t support it you were labeled as one who didn’t want to improve and modernize Medicare, and therefore were against the well-being of the elderly.

And that’s why it’s important to do our best to not conduct the debate in the terms Big Government tries to force upon us.

Our movement must use the terms we choose, words that expose Big Government for what is really is, helping others to see clearly the forces that impinge upon their freedoms. As we do so, we’ll help undermine the legitimacy of Big Government and we’ll counteract its efforts to hijack and change the plain meaning of our language and then use it against us.

We would love to hear your thoughts about what to call various government agencies and practices in order to more accurately show what they really are.  For example, IRS “audits” are really . . . what?

In the comments below, please provide your ideas for how we can use language to expose Big Government for what it really is. Also, if you’re aware of other resources on the web that have attempted or are working on this project, please provide links to them below.

Please share this post with five friends, family members, employees or co-workers and then subscribe to our RSS feed and our newsletter, and join our Facebook group.

Seems that Massachusetts would be a good case study to help us understand how the federal program might go.

In 2006, Massachusetts Governor Mitt Romney and the state’s legislature made Massachusetts the first state to forcibly require residents to purchase health insurance.  They called this an “individual mandate”.  They also required employers to make health insurance a part of employee compensation. They called this the “employer mandate”.  To encourage compliance with the two mandates, the state expanded its Medicaid program and created subsidies.

Even though the insurance program isn’t owned by the government, it effectively runs it.  Michael F. Cannon, director of Health Policy Studies for the Cato Institute, noted that although these individual and employer mandates operated entirely within the private sector, they “imposed what amount to new tax burdens, gave government the power to regulate all aspects of health insurance and medical practice, and subjected residents’ access to medical care to political calculation.” (Subscription required for linked article; much information from Cannon’s article is referenced below.)

Individual and employer mandates are taxes. If the government forces you to pay your money into its program, it’s a tax, whatever else they try to call it.  To bastardize Shakespeare, “A pile of manure by any other name would smell just as stinky.”

So what has happened in Massachusetts?  Insurance coverage has increased, surely.  But at what cost?  Based on the evidence we have today, costs have exploded while services have declined.  But those responsible for the plan are selling it as a success.

In a USA Today op-ed on July 30th, ex-Governor Romney penned, “When our bill passed three years ago, the legislature projected that our program would cost $725 million in 2009. At $723 million, next year’s forecast is pretty much on target. When you calculate all the savings, including that from the free hospital care we eliminated, the net cost to the state is approximately $350 million.”

Sounds like a roaring success, right?

Wait. Not so fast.

Thorough economic analysis requires that we look at all costs imposed on all economic actors – not just the direct costs to a state government – to determine if a program is successful.

It is true that 432,000 previously uninsured residents are covered under the Massachusetts plan, but ex-Governor Romney’s statement has omitted information about total costs that might give us pause.  There are two costs in particular, discussed below, that have created real burdens for real actors in the economy, but have not been made explicit by the politicians discussing the Massachusetts plan.

First, the cost to Federal Taxpayers who are on the hook for the Massachusetts Medicaid costs.  When a state spends money on Medicaid, the Federal Government matches its spending (on average 6 dollars contributed to a state for ever 4 dollars a state contributes), so when a state increases its Medicaid spending, it increases Federal Government spending on Medicaid.  This cost is born by Federal Taxpayers.  Thus, Massachusetts was able to shift some of the cost of its program onto the backs of out-of-state Federal taxpayers.  Since there’s no such thing as a free lunch, you and I are picking up part of the tab for Massachusetts’ “free lunch”.  Good thing the Federal Government will never run deficits, will have an eternally expanding tax base that they can tax at ever higher rates, and will be able to pay for these programs indefinitely, right?

Second, and more importantly, the budget numbers ignore the cost to the people who have the mandate to buy this insurance!  If the government confiscated this money directly in taxes and then similarly bought the policies directly on behalf of citizens, you’d see the true cost.  But by forcing people and employers to buy the insurance, the government rids itself of the nasty business of having to show the true cost of its programs in its budgets.  They also divest themselves of the need to enact politically unpopular tax increases.

Massachusetts Taxpayers Foundation – in a study that happily touted the fact that government had managed to pull a rabbit out of its hat by forcing the true cost of its programs off its books -  conservatively estimates that “the added cost to Massachusetts employers for newly insured employees and dependents is at least $750 million – more than double the $353 million increase in state spending since health reform was enacted.”

When you include these two costs into the program – the cost to the U.S. taxpayer and the cost to individuals/employers through the mandate – the full cost in 2009 exceeds $2.1 billion.

So that’s the true “cost” of the program once you get rid of the accounting gimmicks.

Cannon points out that, seen this way, the true cost of covering the uninsured is about $6,700 per person.  Contrast that with the 2007 national average cost of an individual policy at $2,600, and you’ll see that you’re paying 157% percent more per person for coverage in Massachusetts.

Now, because only 40 percent of the cost of the Massachusetts plan appears in any government budget and is borne by the private sector, politicians take the liberty of calling it “low cost” and a “success.”

Common sense tells us that when resources are forced to go into one use by coercive means, they are not able to be used for a likely more desirable, more valuable, second use.

If employers are being forced to allocate a greater share of revenue to pay for compensation, those dollars cannot be used elsewhere, to build the business, expand operations, give raises, etc.  So there’s a hidden cost.  Since most employers look at the health insurance benefits they provide as part of the cost of total compensation, the only way they can continue to reinvest in their business at previous rates is to hold total compensation constant. In a mandated-coverage scenario, the only way they can do this is to cut wages or lay off workers.  Otherwise, they lower profit margins and stall economic growth and development, increasing the risk of being put out of business.  (We would just note that the current Federal plan forbids the lowering of wages to help pay for the mandated insurance coverage, so they only option is to lay off workers in order to keep total compensation costs constant – see HR3200 Page 147 Lines 14-19 for this prohibition.)

At the individual mandate level, if consumers are being forced to pay more of their income to support a government program, that’s less money they have to spend in the private sector on goods and services they would otherwise freely choose.

The government  is telling you what goods and services you *will* value.

The true outcome of mandates is to make those who don’t want health insurance but can seemingly afford it underwrite the cost of it for those who want health insurance but seemingly can’t afford it.

So it’s 157% more expensive to pay for health insurance in Massachusetts than the rest of the country.  We’d expect that the care received is at least 157% better, right?

Cannon writes, “In 2004, specialist wait times in Boston were already among the highest in the nation. Over the next five years, wait times fell in most U.S. cities and averaged 21 days, but in Boston they rose to an average of 50 days, even though Massachusetts has more doctors per resident than any other state.”

So wait times to see a doctor in Massachusetts are 138% longer than the U.S. average, even though there are more doctors people could see per capita than any other place in the U.S.  Sounds to me that when you hand out “free care” people use it more frequently, spiking demand and therefore cost (as Freshman Economics Class Supply/Demand Curves would have predicted).

So how has Massachusetts decided to handle this increase in cost?

By kicking people out of the plan.

Cannon writes, “When the Massachusetts legislature needed to trim $130 million … it canceled coverage for 30,000 legal immigrants — suggesting that politicians charged with rationing care will do so at the expense of those who are least politically powerful.”

Now that the *legal* immigrants are out, who is next in line to have their services cut?

And this is just year three of Massachusetts program.

Now, onto the Federal Government.  Currently the House plan mandates employer coverages.  It also forces employers not providing coverage to pay a tax equal to 8 percent of payroll, whether the company is profitable or not.

On top of that, uninsured individuals will be forced to pay a tax equal to 2.5 percent of their income.

Thus, Cannon notes, “An uninsured worker earning $50,000 per year with no offer of coverage from his employer would therefore face a 15.3 percent federal payroll tax, plus a 25 percent federal marginal income-tax rate, plus an 8 percent reduction in his wages, plus a 2.5 percent uninsured tax. In total, his effective marginal federal tax rate would reach 50.8 percent.”

Remember that promise the president made about no middle class tax increases?  Well, if you don’t, don’t worry about it.  He doesn’t appear to remember it either.

And all of that before noting this uncomfortable fact.  The Congressional Budget Office estimates that just a portion of the plan will cost more than $1,000,000,000,000 (yes, that’s a trillion, or a million dollars a million times) over the next decade, and more than that after 2019.

The scary thing is, there is some solid analysis that shows this estimate may be a Trillion too low!  Let’s not forget that, as Michael Tanner reminded the Wisconsin Assembly Committee on Health and Health Care Reform, ”In 1967, the House Ways and Means Committee predicted that Medicare would cost $12 billion in 1990. In reality, the program cost over $110 billion that year. In 1987, Congress estimated that the Medicaid Special Hospitals Subsidy would reach $100 million in 1992. The actual cost exceeded $11 billion.”

In one case, Congress underestimated costs by 10 times.  In the other case they underestimated costs by 110 times!  How confident are you that this Health Care Proposal will only cost a trillion or two?

Universal Health Care Through Mandates, you have been weighed and found wanting.  Despite years of searching incessantly, Government still can’t find that free lunch they keep promising.

Perhaps a little magic is what we need.  Where’s Harry Potter when we need him?

To learn about real reforms for health care, including proposals for how to insure more Americans and lower costs, read Michael Cannon’s book, Healthy Competition: What’s Holding Back Health Care and How to Free It.

Having more people insured, protected against catastrophic adverse health events, is a desirable and valuable outcome, provided it is not enacted by coercive or confiscatory means.  There are right ways and wrong ways to go about helping people who do not have insurance.  Government mandates are not the answer.

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He then recounted to us how Arizona came to find itself in this predicament.

At bottom, the cause is a fatal flaw within the state’s Medicaid program.  How that fatal flaw came about is the key lesson that we must not forget during the national health care debate.

The flaw was a Trojan Horse that once entered into Arizona law ensured an economic crisis years down the road, and that day has now arrived.

Some nefarious lies were told to the Arizona electorate that misled them in 2000 into voting for something other than what they thought they were.

Does this sound like any tactics you’ve seen employed by Big Government recently?

In Arizona, the state Medicaid program is known as The Arizona Health Care Cost Containment System (AHCCCS, pronounced “Access”).  As a Medicaid program, it is a joint-expense program between the State of Arizona and the Federal Government, by way of its Centers for Medicare and Medicaid Services (CMS).
In 1998 Arizona, along with 46 other states, agreed to settle a lawsuit it had filed against the tobacco industry.  The tobacco manufacturers agreed to pay each state a part of the total $206 billion settlement.  The payments were to be made to the states over 25 years, a portion paid each year.

Arizona’s share was at the time estimated to be $3.2 billion, with adjustments for inflation and with a provision to lower payments if the number of cigarettes sold in the US dropped over that time.  Each state was permitted to spend its settlement money in whatever way it saw fit.

Enter Proposition 204.  The proposition was proposed to “Set into law the method of disbursing and spending the approximately $3.2 billion the state anticipated to collect as part of the Tobacco Master Settlement Agreement. Targets for the funds include education aimed at the prevention of tobacco use among minors as well as health care.” (emphasis SBABG)

So what you had was this chunk of money coming in, and a proposal to use it to prevent tabacco use among minors and help out with public health care.  Well, who doesn’t want to help kids not to smoke, right?  And if there’s “free money” coming in, heck, we can use it to help provide health care, too, right?

This is what was sold to the public.  A claim that it the proposition was to just use tobacco settlement monies to fund children’s and health programs.

But the actual language of the proposition was far different from what was sold to the public.

The proposition actually changed who was eligible for AHCCCS by broadening the eligibility threshold  from 34% of the poverty level to 100% of the poverty level. And it stipulated that if the tobacco money was not sufficient to cover this increase in spending that the spending increase would have to be covered by general funds and no limitations on enrollment could be made.  Straight from the horses mouth.

That part in bold, just 17 words, tacked onto the end of a paragraph, snuck into a proposition 2 pages, 24 paragraphs, 65 sentences, 836 words long, just 2% of the language in the proposition, was the Trojan Horse.

The taxpayers had no idea that language meant they were on the hook for this program for any amount not covered by the tobacco settlement. They had no idea they had just massively expanded taxpayer exposure to an “all-in” program with no caps on enrollment up to 100% of the poverty line.  And because AHCCCS is a first-dollar program, it meant that all tax revenue went first to meet all AHCCCS needs, and then whatever was leftover would go to the budgets of other programs, like, say, education, police, fire, etc.

And to add insult to injury, the provision allowed persons with incomes above the poverty line to spend down their income on medical bills to qualify for coverage.  Perverse incentives, anyone?

Fast forward to 2009.  What have been the consequences?

If you have a modicum of common sense, what happened was about what you’d expect.  More people went on AHCCCS and more money per person on AHCCCS was spent.  By 2003 Arizona had more people on AHCCCS than they had in public education!

From 2001 to 2003 alone AHCCCS payments increased from $200 million to $1.2 billion – a 500% increase. You’ll remember that the entire tobacco settlement, over 25 years, was only $2 billion more than that!  Gulp.  In three years they gobbled up nearly 40% of the settlement funds.

In 2009 alone the amount spent on AHCCCS is projected to be $1.5 billion.  The tobacco funds are long gone.

Before going on to more carnage, let’s just point out again that AHCCCS is an acronym standing for “Arizona Health Care Cost Containment System.”  You have to love the ironies embedded in Big Government misnomers.

Cost containment.  To be fair, Arizona is a growing state and its population increases regularly, therefore the number of the poor in the state has increased, as well.

However, by 2006 real (adjusted for inflation) per capita spending increased 46% by 2006! (see the graph below, created by the Goldwater Institute).

By 2006 AHCCCS accounted for 22% of ALL state expenditures.  Today, in 2009, 20% of Arizonans are dependent on a health care program that was originally intended for only the poorest of the poor.

And there’s another kick in the teeth. The $3.2 billion is turning out to be less than that amount, because smoking has decreased.

Finally, the end game has arrived.  Barring a miracle, AZ will likely pull a California and begin handing out IOUs at some point this year.  Of course, AZ could always sell the state capitol building and kick the can further down the road.

And all of this because of the unintended consequences brought about by little Trojan Horse snuck into a proposition.

Now, why is this important to the current health care debate?

That there are unintended consequences of giving out free health care that will make costs rise for everyone?  Check.  But that’s no Trojan Horse.  That’s right in the bill and has been well documented by the Congressional Budget Office.

That health care will be rationed and choice reduced?  Check.  But that’s no Trojan Horse, either.  That’s also right in the bill and is being well documented.

Is it that the program doesn’t bode well for the nation or the rest of the states since, “As Arizona Goes, So Goes the Nation?” Well, of course that’s true, but that’s no Trojan Horse.

The Trojan Horse is something called “The Public Plan.”  The Public Plan is a proposal being put forth in the Health Care Plan (HR 3200) which establishes a government-run insurance provider.

The government is telling us that the purpose of this provider is to keep the private insurers honest, to lower costs, and to make health insurance more competitive.

But that’s a lie.  Not only doesn’t it do those things, saying that the purpose of the plan is to achieve those objectives is an effort to obscure it’s real purpose.

Its real purpose it to lay the groundwork for the creation of what’s called a “single payer” program.  That is code for a government-run, socialist, health care system, where the government makes all payments for all health care procedures and therefore, sets pricing, determines care, and determines coverage for all citizens.

Don’t believe it?  Just have a listen to the President and his advisers.  When they thought we weren’t watching, they stated very clearly that their intention with The Public Plan was to reduce choice and competition.

Of course, they are out in full force, trying to spread disinformation, and telling you that they’ve said no such things as you just observed.

And they will tell you that they want an open debate, but they don’t. And they will tell you they’re being transparent, but they’re not.

And they will tell you that their plan will save money, but it won’t. And it will be more expensive than even the Congressional Budget Office’s worst predictions.

You can add that spending to the already projected Budget Deficits:

And let’s not forget the deficits that Social Security and Medicare are already on target to hit over the coming century (A Cumulative Deficit of $83 Trillion by 2080).  Tack the expenses of this plan on top of these.

Public opposition is building against the Health Care Plan and the Public Option particularly. Only 32% of Americans support Single Payer while 57% Oppose it.

Now, watch out. The Senate knows that the public is against single payer, and they know that the public is becoming increasingly informed that the road to single payer is through the public plan, so they’re preparing to introduce a public plan by another name.  They’re calling the plan a  co-op plan. The co-op is Health Care’s version of a Freddie Mac or Fannie Mae.  One Senator warned that it will:

You know this is the case when Senate Majority Leader Harry Reid concurs and says:

So don’t be deceived.  It’s the same old Trojan Horse the Public Plan is  They’ll lie about it now.  And in a few short years we’ll have a real mess on our hands.

Learn from Arizona.  Don’t be deceived by what’s being sold you.  Read the fine print in the bills, listen to the past statements of the people who are lying to you now.  Be forewarned.

Reject the entire Health Care Bill as it currently stands, and particularly the Public Plan and its brother-in-arms the Co-Op Plan.  It’s the Trojan Horse of Single Payer.

Please visit DownsizeDC.org and use their free service to send your Representatives a message.

We’re always interested in your hearing from you in the comments below.  If you have any “Trojan Horse” stories of your own, please also share them.

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To understand why this is, you need only understand the Broken Window Fallacy.

Frederic Bastiat originally formulated the Broken Window Fallacy in his landmark book That Which is Seen and That Which is Not Seen.  Henry Hazlitt then expounded and reformulated it for a more modern audience in his classic work, Economics in One Lesson (which was one of our 31 top resources for small business owners and employees).  In Chapter 2, entitled “The Broken Window,” Hazlitt wrote:

The Fallacy of the Broken Window exposes the lie that, as one Austrian Economist put it, “the … destruction of wealth fuels its creation.”   He then goes on to summarize the Fallacy and concludes:

You can see the absurdity of the position … when you take it to absurd extremes. If the broken window really produces wealth, why not break all windows up and down the whole city block? Indeed, why not break doors and walls? Why not tear down all houses so that they can be rebuilt? Why not bomb whole cities so construction firms can get busy rebuilding?

It is not a good thing to destroy wealth. Bastiat puts it this way: “Society loses the value of things which are uselessly destroyed.”

But Big Government frequently peppers hammers us with the message that we must create new wealth by destroying old wealth!

And that’s where Cars For Clunkers comes in.  Here’s a quick summary of the program and where it goes wrong.

1. The Federal Government takes tax-dollars, or borrowed dollars (to be paid back later through taxes), and offers to hand that money to people who will trade in pre-selected older cars; the money is to be used toward buying a new car; then the government takes the traded-in car off the road, and junks it, often by destroying the engine; the “subsidy” given toward buying the new car (for each trade-in) is $3,500-4,500
2. If the value of the trade-in car is less than the $3,500-4,500 handed in trade value the government has overpaid for the car, despite that the government is about to junk it, thus ensuring that no value will be received in return.
3. If the value of the trade-in car is more than the $3,500-4,500 handed, the government still derives no value from the trade because it’s not reselling it; it’s junking it and stripping it for salvageable parts (which are minimal)
4. The net number of cars on the road remains the same; maybe net emissions drop or maybe fuel-usage drops (because of better fuel efficiency) in the aggregate, but maybe not! (more on that below)

So, in this new version of the Broken Window Fallacy, our modern-day Window Breakers are destroying drivable cars, then handing out confiscated or borrowed money to the people who are allowing their “windows cars to be broken” because other people are paying for these windows cars to be replaced with newer, better, sexier models!

They do this in the name of saving the environment from pollution, or saving on “waste” through fuel-efficiency, or preventing global-warming through reducing emissions, or whatever.  It really doesn’t matter what justification they’re using, it’s wrong on several levels.

It destroys wealth by not letting these cars be used up over their useful life.  It destroys wealth by routing scarce resources into activities – in this case, car building – that wouldn’t otherwise take place, denying other industries access to those resources.  It destroys wealth by taking on liabilities, through borrowing, that have to be paid back later by taxpayers (reducing their purchasing power in the future) or by taxing them immediately (reducing their purchasing power today).

Also, building the new cars emits all kinds things into the atmosphere and gobbles up energy in the production process!   So any gains in emission and efficiency are offset by that, too!

Guess what else proponents of this destruction are missing?

They are oblivious to how the incentives will change future behavior.

These people traded in a car they’ve been likely to drive less.  We can safely assume these cars didn’t get as good gas mileage or were older, “clunkers”, because they were targeted for these reasons.  These cars also may not have been driven at all, or driven rarely.  However, they’ve been used to help people get a vehicle that they’re now more likely to drive more frequently!!!  More driving means more emissions, even if the emission per unit of travel is less.  More driving means more fuel consumption, even if the fuel consumption per unit of travel is less.

See, when you change the incentives, you change the behavior.  The people who owned these traded in cars were incentivized to drive them less by having to pay more for a unit of travel, and by having to conserve the remaining life in the car, which may have been approaching the end of its life over the next 5-10 years.  Now?  Not so much.

In fact, the New York Times reports, “Michael Gerrard, director of Columbia Law School’s Center for Climate Change Law, said in a statement that the cash-for-clunker program is not a cost-effective way to reduce fuel use or greenhouse gas emissions. Any energy savings, he said, could take several years to realize, considering the time it takes the fuel savings from a new car to exceed the energy cost used to make it.

Who are the favored parties?

The subsidized consumers, of course.  But also the favored industries, who have had their goods favored at the expense of other industries.  The government isn’t handing out money to go buy [fill in the blank], yet they’re siphoning off money and resources from a finite supply and putting it into one area, at the expense of other areas.

Think the Auto-Dealers liked it?

Look at this:

Of course!  The “government” should put more money into it.  Let me fix that quote to show you what it should say if it were telling the truth.

Who were the losers?

Everyone else, especially the taxpayers.  And other businesses and industries, especially ones directly impacted by trading these cars in instead of servicing them, auto-parts sellers, mechanics, etc.

The funny thing is that down the road even the dealers will suffer, because this program created false demand and just kicked the can down the road so that the dealers could put off their day-of-reckoning a little longer.

Want to feel some outrage?

Read this story and watch the video, especially watch the video at the 2 minute mark on where they discuss how the cars are junked, and how otherwise re-saleable parts are destroyed in the process.  Perfectly usable cars being destroyed!  And, as an added bonus, Big Government makes a complete mess in administering the program (but don’t worry, they’ll run nationalized health care flawlessly).

We’re not being fooled.  The majority of American people understand that this program is corrupt and just 35 in 100 Americans are in favor of it.

But since we’re living in the age of Big Government, so let’s go all the way with this!

Why stop at cars?  In fact, the Wall Street Journal today asked, Why not a “Cash for Everything” program?

Let’s blow up buildings and rebuild them with subsidies to stimulate commercial building.  Let’s burn down homes and rebuild them with taxpayer funds to stimulate the homebuilding industry!  Let’s break up all our fine-china and buy everyone a new set!

Or maybe not.

Let’s just point out one last thing about the way Cash For Clunkers was run, and how it exposes Big Government hypocrisy.

Very poor people, the car-less among us, who don’t have any private transportation of their own, and who Big Government always profess to help, could have really used those cars.  They could’ve been given to people in need.

This summer I donated my “clunker” to the Kars 4 Kids charity, which then sold it and used the money to help poor children.  I’ll bet you my shiniest nickle that this government program has caused material hurt to charities like Kars 4 Kids.  And not just this year, but also in future years since many cars that may have been later donated to charity had their end-life pushed up to the present day and therefore won’t be available for donation in the future.

Just another sad instance of the Bastiat’s “unseens” or, in words we like to use, “what-might-have-beens.”

The program should probably be called “Cash From Clunkers” since this bunch of Big Government phonies are possessed of such little brain-power that they can only themselves be referred to as Clunkers.  Then again, referring to it as “Cash From Clunkers” also obscures the fact that though they are delivering the money, it’s not their money.  It’s our money.  Or China’s money that they’ve borrowed and we will have to pay back someday.

Anyone suspect that this whole program might just be one ruse to prop up Government Run Motors or as a payback to the Automobile Unions?

Whatever.  It’s corrupt.  Another example – in a long and growing list – of corruption and Big Government going together.

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—

UPDATES -  Below by Date – how did our predictions go relative to what really happened?  Read the results and decide for yourself.  (N0, we’re not prophets, we just have common sense and an understanding of basic human behavior, mysterious commodities that appear to be absent in politicians.)

UPDATE: October 4, 2009 – Cash for Clunkers Fails to Help Economy and Environment

Last week U.S. automakers reported that new car sales for September, the first month since the clunker program expired, sank by 25% from a year earlier. Sales at GM and Chrysler fell by 45% and 42%, respectively. Ford was down about 5%. Some 700,000 cars were sold in the summer under the program as buyers received up to $4,500 to buy a new car they would probably have purchased anyway, so all the program seems to have done is steal those sales from the future. Exactly as critics predicted.

Cash for clunkers had two objectives: help the environment by increasing fuel efficiency, and boost car sales to help Detroit and the economy. It achieved neither. According to Hudson Institute economist Irwin Stelzer, at best “the reduction in gasoline consumption will cut our oil consumption by 0.2 percent per year, or less than a single day’s gasoline use.” Burton Abrams and George Parsons of the University of Delaware added up the total benefits from reduced gas consumption, environmental improvements and the benefit to car buyers and companies, minus the overall cost of cash for clunkers, and found a net cost of roughly $2,000 per vehicle. Rather than stimulating the economy, the program made the nation as a whole $1.4 billion poorer.

UPDATE: October 23, 2009 – Dealers say Cash for Clunkers has made cheap, used vehicles harder to find

In his 20 years in the business, salesman Mark Sauer has never had a tougher time finding inexpensive used cars.

“It’s never been this bad,” said Sauer, buyer and sales manager of Vaccaro’s Auto Buyers of Reading, 805 Hiesters Lane.

“Customers used to be able to find a good car for their son or daughter to take to college for $2,000 or $3,000, but now that same car may cost $5,000,” Tabakelis said. “It’s sad.”

He, too, blames cash for clunkers, which has led to fewer vehicles being available at used-car auctions, and the recession.

“You used to be able to find a decent car for $2,500, and you can’t anymore, especially in the past two months,” said Arie Garcia, the association’s office manager.

Another problem is that used-vehicle prices have quickly risen above their book values, making it tougher for customers to secure financing, Garcia said.

“Cash for clunkers really hurt the used-car industry,” she said. “I think it hurt more people than it helped.”

UPDATE: October 29, 2009 – Taxpayers paid $24,000 per car

The Cash for Clunkers program gave car buyers rebates of up to $4,500 if they traded in less fuel-efficient vehicles for new vehicles that met certain fuel economy requirements. A total of $3 billion was allotted for those rebates.

The average rebate was $4,000. But the overwhelming majority of sales would have taken place anyway at some time in the last half of 2009, according to Edmunds.com. That means the government ended up spending about $24,000 each for those 125,000 additional vehicle sales.

UPDATE: October 29, 2009 – Cash for Clunkers Massively Distorted GDP

If anyone mentions the just-released 3.5% U.S. third quarter GDP growth, just throw this chart in their face. Cash for Clunkers clearly distorted the U.S. economic figures in an unsustainable fashion.

Next quarter, we won’t just be returning to business as usual for auto output. Don’t forget that Cash for Clunkers pulled future auto demand, ie. some of Q4 demand, into Q3. Thus Q4 is likely to be very weak since many people who planned to buy a car in Q4 probably took advantage of Clunkers and bought in Q3.

Next quarter, not only are we unlikely to get Q3’s boost, but motor vehicle output data could subtract from GDP as well. So watch out for the cliff…

UPDATE: March 23, 2010 – Car Sales ($millions) Reported by Dealers

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The Wall Street Journal published a piece yesterday that ties this corruption in NJ to the cankering influence of Big Government programs and policies and also highlights the malaise the state is suffering as its Big Government programs make war on Small Businesses.

It’s worth the read, and is a case study on where the country is headed.  We already have a pretty good case study in California where 7% of the US population lives, yet where 32% of Welfare recipients reside and where the Big Government there has squandered all prosperity it once had.

Read the article for the details of the whole sordid case study.  Here are the key conclusions:

Big Government is why New Jersey created only 6,800 private sector jobs from 2000 to 2007—while public sector jobs grew by more than 55,800. Big Government is the reason New Jersey ranks as the worst of 50 states on the Small Business Survival Index. And Big Government is a leading reason New Jersey has a “corruption problem” that an FBI agent at Friday’s press conference characterized as “one of the worst, if not the worst, in the nation.”

Sandy McClure, co-author of the book “The Soprano State: New Jersey’s Culture of Corruption,” agrees that big government is a big reason behind the state’s corruption problem. “You have all these little authorities that everyone has to go to for permission,” she says. “Too much government means too many opportunities for officials looking to cash in. And there’s no way that the press can keep track of it all.”

Ms. McClure is right: The more extensive government’s reach, the more opportunities the governing class has to steal from and shake down the productive class …

…The point is that politicians and officials have more to sell in an environment of high taxes, big spending and overregulation—the same things that help explain New Jersey’s anemic economic growth and job creation. When government gets too big and complicated for businesses to get their permits and approvals and funding honestly, the dishonest prosper. And the honest get fed up and flee.”

Big Government fails everywhere it is tried.  Where does your state rank on the Small Business Survival Index?  Any correlation you’d notice with Big Government’s influence?

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