Monday, October 26, 2009

Legalizing marijuana

Though I remain skeptical, it appears that we could be one step closer to legalizing marijuana. I don't really see the harm in it, and the benefits look pretty good from a lay perspective.

The New York Times article only refers to medical marijuana, but opponents of complete legalization are probably correct that policies of decriminalization regarding medicinal use will eventually lead to looser laws. I don't know, but if I had to guess, moneyed interests in the pharmaceutical industry played a big role at holding up medicinal marijuana for so many years, probably because a cheaply grown plant can treat several illnesses just as well -- if not better -- than a more expensive pill.

I don't understand why we don't just legalize marijuana across the board. The drug itself is less harmful than many over-the-counter drugs and other legal recreation drugs (alcohol comes to mind). And the whole "gateway drug" argument is bullshit. Nothing about marijuana itself predisposes one to further drug use; if you're likely to experiment with one drug, you'd obviously be likely to try others.

Still, according to the PEW Research Center, the country remains divided.
Legalizing marijuana remains a controversial proposal, with 46% saying they favor removing criminal punishments for the possession of small amounts of marijuana and 49% saying it should remain a criminal offense. Support for removing the penalties for minor possession has remained steady since the 1980s, and is down slightly from the 1970s.
I'm most certainly with the 46%. I don't even understand the argument against legalization; the benefits of taxation could be astronomical -- especially for my home state of Kentucky, where we grow that stuff like madness -- not to mention the money saved on prosecution and incarceration of minor drug offenders.

I'm honestly surprised more politicians don't take a harder line on this issue. I'm not sure it would be the political suicide some fear, though Gatewood Galbraith, perennial loser in the Kentucky governor's race (and my favorite candidate because he's bat shit crazy) hasn't gained much traction with it. Someone slightly less blunt might have better luck -- I'm looking at you Schwarzenegger.

"Too big to fail" failure

The New York Times reported today that Congress is trying to "rein in" companies that are "too big to fail." When I saw the headline, my first thought was, "It's about time." My second was, "I wonder if they've been following my blog rantings." Unfortunately not.

According to the NYT, the plan is as follows:

The measure would make it easier for the government to seize control of troubled financial institutions, throw out management, wipe out the shareholders and change the terms of existing loans held by the institution.

In the event that a crisis were to occur, the proposed bill sets up corporate living wills:

It would force such institutions to hold more money in reserve and make it harder for them to borrow too heavily against their assets.

If companies of this magnitude continue to exists, I feel like these steps are good measures to protect the financial system as a whole. But that begs the question, why do we let companies of this magnitude exist? I think it's time for some good ol' Roosevelt trust busting.

I don't want it to be easy for the government to step in and start running a business; that's not how a capitalist system should work, and under that model it can't. Organizations take chances with each decision they make, some leading to greatness and others to failure. Eliminating risky business ventures can slow the failure rate, but it seems to me that it would also slow invention.

Also, the idea of not borrowing too heavily against one's assets is really just common sense. However, even Adam Smith new the value of credit, and he always argued that you would be foolish not to have all of your assets working to turn a profit. Wealth is created by making your money work for you, not by you working for money.

And that's really the principle behind investing, especially in potentially high-yielding ventures like many in the stock market. Speaking of the stock market, it employs this really great method of limiting centralized power and generating wealth: splitting stocks.

Companies' boards of directors typically elect to do 2-for-1 stock splits, meaning they double the number of shares and halve the price of each. This makes stocks not only more numerous, but also more affordable, which encourages additional investing by an increased number of shareholders. This helps to generate capital for institutions and it expands the ownership power base, thus limiting it. Not to mention the fact that stocks often increase in value after a split, so it generates more wealth for shareholders as well.

The same could be done with any company that is "too big to fail." Split them into smaller companies, diversify the power base within that field, and let them compete, grow, or fail as performance dictates.

The problem is less the behavior of these companies than it is the "too big to fail" part, so let's just eliminate that and be done with it.

Sunday, October 25, 2009

Resurrecting the public option

It seems as though the public option might still have a chance at getting through Congress. I was reading this article in The New York Times this Sunday and I got kind of excited.

I've blogged before about the necessity of a public option -- or at least that's how I see it -- and I've been angry with the Democrats for backing down on the issue. After reading the NYT article, I won't say I stand corrected, but hats off Reid and Schumer for keeping up the fight.

I agree with McCain when he says that the Democrats have enough votes to pass a fairly progressive public option plan in the House, but that the Senate is too shaky to guarantee anything of great magnitude. In lieu of of an all-out-government-run insurance plan, we may instead see the inclusion of a "trigger" option in some of the bills floating around the capital.

Essentially, this trigger option would place a time line on insurers to meet certain legally mandated standards -- particularly concerning cost of care. If these conditions are not met, it would then trigger the creation of a government-run or nonprofit plan to enter the marketplace and create a lower, more level playing field.

In the end, this trigger plan is really just public option light, and I feel like it would accomplish the main goal of the public option as it has been described, namely keeping insurers honest. Still, since the creation of a trigger plan would only be a looming threat rather than an actual one I would rather see a true public option (I'm actually in favor of a a single-payer system, as readers already know).

Some -- including Sen. Mitch McConnell from my home state of Kentucky -- feel even the trigger option is too much:

Senator Mitch McConnell of Kentucky, the minority leader, said on "This Week" that "100 percent of Republicans have indicated that they don’t think having government in the insurance business is a good idea."

I think the Republicans are starting to run out of excuses on this one as it becomes increasingly obvious that insurers -- ironically unlike those they insure -- are simply paid up with the right people. I'm curious to see how this whole thing will play out, and I'm hopeful, but I worry that once again the voices of the many will be outweighed by the money of the few.

Wednesday, October 14, 2009

Measuring the recession

Today was a good day for investors as the Dow closed at over 10,000 for the first time in longer than a year. Moreover, J.P. Morgan Chase reported some pretty good third-quarter earnings. Hopes are that other major banks, like Citigroup and Bank of America, will report high earnings later this week as well.

Does this mean the banking crisis is over? What about the recession?

That all depends on the scale one uses to measure each. Recovery in the stock market is a good thing. I checked my Scottrade account for the first time in awhile without crying, but it's not like I'm rolling in it, and neither are many other small investors.

Holistically, the economy is still suffering. The housing market is yet to bounce back and foreclosure rates are still high. In my mind, perhaps the most important number for middle-class America is the unemployment rate, which rose to 9.5 percent in September according to the U.S. Bureau of Labor Statistics -- and it's probably growing.

And what about the banking industry? Well, Chase is claiming that the economic crisis -- which they directly helped cause -- has slowed consumer spending to the point where their credit card department is not expected to turn a profit until 2011. On top of that, let's not forget $25 billion they still owe the taxpayers from the June bailout, which may have been one of the worst decisions in our nation's history.

I think you could make the argument that the banking industry is worse off now than it was a year ago -- or at least it potentially could be. We're seeing a phenomenon now where large, failing banks are being purchased by larger, faltering banks. This means that institutions that were already "too big to fail" are not only continuing to fail, but are getting even bigger. Take a moment to let that settle in.

The very concept of "too large to fail" seems to connote ideas of "trusts," "pools," "monopolies," and other business practices that have been illegal for a century. Why can't we break these banks up and overhaul the system? If we allow these institutions to grow without stiff regulation -- and even with it, because we've seen how quickly that erodes -- we are begging for another meltdown. What's worse is the precedent we've set with the bailout, which encourages institutions to act frivolously know that our dime will rescue them. What the hell kind of capitalism is that?!

I guess what it comes down to is the fact that banks are paid up with the right people, so much so that it often overrides the democratic process itself. The Supreme Court's ruling on the Hilary film could make the current situation that much worse. I just wonder how much our system can stand before it collapses on itself...or maybe even implodes against itself.

Friday, October 9, 2009

Obama wins Nobel Peace Prize

It was announced early this morning that President Obama will be awarded the Nobel Peace prize, and that leaves me in utter shock. Dr. Hollander pointed out this AP story that shows I'm not alone.

Apparently the president himself was unaware that he was even nominated. I have to say, I'm not surprised. He's now the fourth U.S. president to win the prize. Jimmy Carter won in 2002 long after his term in office expired; needless to say he had racked up an impressive resume both in and out of office. The other two presidents to win were still in office. Theodore Roosevelt won in 1906 for negotiating a peace between Japan and Russia. Woodrow Wilson won in 1919 after negotiating an end to WWI and beginning the steps to create the League of Nations, which was later replaced by the United Nations.

Obama seems a bit out of place in that group. I think he is an intelligent, well-intentioned man who most certainly has made "extraordinary efforts to strengthen international diplomacy and cooperation between peoples," as the Nobel committee has stated. But are efforts enough? Other U.S. presidents who won the prize has results, but Obama is yet to deliver on that front.

I find it odd that the prize is going to a sitting president who has failed to close the Guantanamo Bay prison, failed to speedily end the war in Iraq, and is seriously considering escalating the war in Afghanistan. War and peace don't really work together unless you're Leo Tolstoy, but I guess the Nobel committee thinks differently.

I think Obama would do well to decline the award. I know people spend a lifetime of effort to win one of these things, but it's clearly questionable as to whether he is deserving. An exercise in humility would do him that much more good on the international stage.

As for the home front, he's fucked either way, as conservative pundits will have a field day questioning the legitimacy of this award if he accepts(some of them don't even think he's legitimately the president); if he declines they'll argue that even he thinks he's not all that great.

In the end that choice would be mostly a personal one. I like Obama, I really do, but I'm just not convinced that he is the effective leader we all hoped for, and I certainly don't think he has the resume to justify this honor. Hopefully his future endeavors will prove me wrong.

Sunday, October 4, 2009

Health Care Reform (?)

Last week's news that health care reform bills featuring a public option failed to make it out of the Senate Finance Committee left me feeling that much more unsure about health care reform.

I'm a big proponent of a public option, though I'd rather we take a stronger socialist stance that would feature a single-payer plan. A lot of the arguments against the public option are that it would serve as a "Trojan Horse" that would lead to a single-payer system. Naturally, I don't see a problem with that, nor do I really follow the logic.

My figuring is that a public option would be able to provide affordable health care under reasonable conditions and rates. I think private insurance companies could compete, though they would most definitely see a drop in profits. If that means a rise in the quality of care, I'm all for it.

However, assuming private insurance companies could not compete and we actually did end up with a single-payer system, then I'm all for that too. Really all that would mean is that a privatized, profit-driven model could not provide adequate coverage and that the government could. If this scenario led to a rise in the quality of care, then where is the problem?

Still, I don't understand why public and private-run health care institutions could not coexist in a competitive marketplace. Industries like education and parcel services have existed under this model for decades and -- despite problems -- have managed to provide access to these needed services at a level that is usually acceptable. I'm not sure why health insurance would be different.

Nor do I buy into the argument that a public option or a single-payer system would put a government bureaucrat between you and your doctor. We already have insurance executives enacting that role now, so even if the mystical government bureaucrat accusation came to fruition, I don't think things would be much different than they already are.

Insurance essentially serves as a middleman, transferring money from individuals to a pool, and then to a health care provider. Ideally, all that should occur is paying a bill, but since overhead costs for private companies is usually 20 percent higher than those of public institutions, that pool isn't as large as it could be.

Despite all these setbacks to a public option, reform is apparently taking place, and the leading bill from Max Baucus might have a chance. I'm just concerned that without a public option it won't be as sweeping a reform as we need.

The Baucus alternative to a government run plan is to set up state-run exchanges to make shopping for insurance easier. I think the idea is that the people could see if they're getting screwed. My concern is that insurers could artificially inflate their prices as a trust or pool, which would still make insurance unaffordable.

The plan calls for subsidies to help lower-income families purchase insurance but does not require employers to provide insurance to employees, nor does it require individuals to purchase insurance. If these subsidies are not enough to make health care affordable to all -- and they probably aren't seeing as an estimated 25 million people will still be without insurance in 2019 -- and if people are not forced have health insurance, then why bother?

The large expense of emergency room visits will still be shouldered by taxpayers and the system could flounder. Not to mention the fact that this bill does little to provide anything resembling universal coverage. In fact, the tax proposed on high-end plans would probably encourage people to less adequately insure themselves.

The Baucus plan is essentially an extension of Medicaid, but it doesn't seem like the bill calls for enough money to enlarge Medicaid to the required extent. Also, Baucus estimates that American families will still spend roughly 13 percent of their income on health care. I'm not sure what the number is currently, but 13 percent seems high to me.

I certainly don't have the answer to all of this mess, but I do know we need money to make this thing work, and it has to come from somewhere. It seems to me that the extra 20 percent or so that private companies take for overhead and profit would be a good place to make up the difference, but the finance committee apparently doesn't see it that way.