Price Gouging

 Price Gouging

Healthcare insurance has become the perfect storm for price gouging. Like many gainfully employed hard-working Americans, I was shocked (but not surprised) to see my healthcare premiums spike up again, this time +15% year-over-year. Over the past 5 years this cost has doubled. How could this be? Isn't annual inflation 2.5%? Don't economies of scale typically LOWER prices? Hmmm.

Price gouging flourishes under unique economic circumstances, which typically right themselves in a free market; ie if one seller is gouging, then other sellers lower their prices to capture market share. Price gouging almost universally is short-lived. Unless it is engineered.

The danger arises when the market is manipulated by health insurance companies, healthcare providers, and politicians to engineer unfair economic incentives and laws. No one does this better than California, although Massachusetts is a close second. Not surprisingly, these are two of the five states still clinging to the individual mandate.

The individual mandate has been arguably the single most destructive pieces of legislation in history, mandating the purchase of services at a price set by health insurance monopolies in cahoots with government punishable by the IRS. Think about that one.

Access to healthcare is best provided by an open marketplace with multiple competitors vying for your business. By definition, the vast majority of medical services are commoditized services which have been established for decades; provider to patient, no middle man required should be the norm. Simple enough. The gouging begins when access itself is simultaneously squeezed from both ends (it sounds like an uncomfortable medical procedure, and it is.)

First, dollars flow from health insurance companies to politicians who restrict access to the market by defining which health insurance companies "own" certain counties or areas. ie They choose who can compete. Next, the politicians squeeze the constituents by mandating that they HAVE to use said insurance company in certain areas. Finally, the politicians appease the base by using taxpayer resources (read money) to subsidize as many people (not necessarily citizens) as possible.

"Free" is the most expensive word in the English language. When considered a "right" in the context of the healthcare system, high delivery costs are laundered through the hospital, clinic, physician, pharma, and admin systems to name a few. So a routine procedure at the ER which on its face value may cost $100, is ultimately billed out in the $10,000s+. That bill is then thrown into the "insurer pool" like a Baby Ruth on a hot summer day. Gouge the pool!

Monterey, CA is a great example of this price gouging gone amok, but there are hundreds of counties across the country in the same boat. A smaller and smaller pool of full-price payers gets gouged every year because they have no voice; the reality is our local Congressmen Jimmy Panetta happily helped engineer the current system. Residents of counties all across the country facing similar corruption have the same tough choices; vote with your feet out of your home towns or "grin and bear it" every year for the RICO shakedown. Most are just hoping to live long enough to age into Medicare. 

Meanwhile health insurance companies, the true constituents of Congress, continue to pay off the politicians, who are "outraged" by the high cost of healthcare insurance and simply expand the taxpayer umbrella to a larger and larger pool who pay close to nothing for top notch healthcare which encourages all sorts of gaming the system. It is an interesting racket; notch up the premiums every year, subsidize more of the population, gouge the middle class. 

Ending the price gouging corruption is simple; open every marketplace to real competition amongst insurers, publish costs for every service, and eliminate the individual mandate. The free market will solve this problem, and in fact INCREASE the quality of healthcare for everyone as completion drives out losers and promotes winners. This country needs to be in the business of the best outcomes, not beholden to engineered price gouging.

Golden Years

 Golden Years

These are not the "Golden Years" of which many Americans have dreamed. Over the past 3.5 years inflation has destroyed ~45% of purchasing power. Proof? In January 2021 gold was fetching approximately $1850 per troy ounce. Yesterday we reached yet another all-time high in the noble metal, closing the day at $2686. So in less than 4 years almost HALF of your purchasing power has been wiped out.

Why does this matter? It provides concrete evidence that there has been wholesale destruction to the purchasing power of the American dollar. The prices in the grocery store, gas pump, and doctor's office are all real, and they hurt. Gold is a great litmus test because governments cannot create it, unlike fiat money like the US dollar. Much has been written of gold on this blog and how it is a physical form of truth.

America needs to move away from a policy of "Tax, Spend, and Regulate" to one promoting creation; ideally this country facilitates growth by a meritocracy of ideas stabilized by the rule of law.  We want the best engineers, scientists, physicians, entrepreneurs, and leaders. The problem with policy failure is that accountability takes at least 4 years at the national level. By that time chaos can reign, but there is hope for creators.

One surefire way to reduce what I consider to be the bane of society, inflation, is to increase productivity. Increasing productivity is a function of treating creators and their capital, both mental and fiscal, well. If that is not an outcome in the coming months, then prepare for gold's luster to shine even brighter. Expect the US dollar to further weaken with increased debt not supported by increased productivity.

Many of society's problems can be both addressed and solved by unleashing the power of productivity. Enable creators to operate in free markets to create solutions. Removing over-regulation facilitates outcomes in the best interest of society because it is the very members of the society who will make economic choices in their own best interests. Choice is the cornerstone of freedom and democracy. 

Ideally capital flows where it is best utilized and not via a laundering system which charges an exorbitant toll to deliver diminishing funds; consider the overhead in the existing income redistribution model. How many hundreds of billions are collected simply to hand out hundreds of millions? Less of the middleman is better for the middle class and nearly everyone else too.  

For the majority of Americans the answers are both simple and obvious; we know what is broken, we know how to fix it, and we know who is accountable. The challenge is can we still get a fair shake at the voting booth to elect leaders who can implement the will of the people? Does the rule of law still exist? Will an unelected shadow cabal run this country? These are the challenges of our Golden Years.

The War on Small Business

The War on Small Business

Kurt Vonnegut once quipped that: "The two real political parties in America are the Winners and the Losers." With the Small Business Index at 62.1, the lowest since the pandemic, which itself was the lowest in a generation, small business owners are the losers. Given that small businesses create two-thirds of new jobs and deliver 43.5% of the United States GDP this is a BIG problem. But your elected leaders don't care. Why? Because small businesses do not have the clout to influence political change.

Case in point, why would a Veteran-owned small business like mine have to pay 50X (you read that correctly, FIFTY times) the Blue Shield healthcare premium as an illegal resident in California for the SAME healthcare plan? Answer: Because somebody has to pay the bills, and the proverbial "last man standing" is the small business owner. Freedom is expensive.

How did we get here? The war on small business has been brewing for decades, but finally the straw that broke the small business owner's back was healthcare. With the passage of the ACA on April Fool's Day 2010, pieces on the chess board started moving around rapidly. Political parties immediately started jockeying for pole position.

Since the majority of politicians never owned a small business, they were easy to influence. The labor unions got to work. Big corporations saw what was happening and they got to work too. Given that small businesses are by nature fragmented without a unifying central leadership they waited to see what happened next. Plus they were busy working trying to make a living. Bad move.

Labor Unions and Big Business effectively gamed the healthcare system so that union members and employees got cut rates on healthcare plans, and to make the deal more palatable, they also negotiated for universal care pools. But of course somebody had to pay unsubsidized premiums, and that of course would be based on income. Who better to sock it to than the silent small business owner?

Reaching out to my elected representative, Jimmy Panetta resulted in the terse reply that "healthcare is complicated." After a decade in place, it is not that complicated; depending on your income you pay different rates. Imagine if McDonald's worked that way! Your "Happy Meal" price would be a direct result of whether you worked for a union, a large company, or your immigration status! Preposterous.

Across the spectrum of wealth distribution, healthcare is the most onerous. But that is just the most glaring example. Inflation is the next one. It hurts the small business owner most, because he has to absorb more of the pricing increases and if he is to survive, passes along less of those increases. The 16% pay increase for rail workers or 10% pay increase to pilots won't decrease rail traffic or flight volume. In fact, the COST to ship freight or park a butt in a seat will simply be adjusted up, up, and away!

For the small business owner it is a death by a thousand cuts, with some "cuts" akin to a sucking chest wound. Like him or despise him, Joe Biden has done one thing really, really well...he has acted as a fine bellhop for the labor unions. When you print the money and sign the contracts to print more, inflation doesn't hurt much. Indeed, most union workers have never had it so good. 

With Labor Unions the winners and small businesses the losers, what will the impact be on larger businesses? The cost of labor is typically the MOST expensive part of creating and delivering a product or service. As we can imagine then, large business are increasing prices and laying off employees (non-union of course, and many expendable H-1B visa holders at that) to cover the cost of inflation.

Net net when the wokescreen clears, this equation balances by the destruction of small businesses, many of which will cease to exist, go heavily into the black market, and/or rapidly innovate by embracing new technology and doing business differently (low odds on the latter.) At the end of Joe Biden's reign, fewer small businesses will remain, more unions will exist, and big business will be thriving (with far fewer employees.) Invest accordingly.

 

Civic Duty

 Civic Duty

On this most hallowed day of Civic Duty, did you get a call at the crack of dawn from your Congressman profusely thanking you for paying your "fair share?" No? Hmmm. I'm getting the distinct feeling that we (taxpayers) are getting the taxation without the representation. This brings me to a serious and singular question for you my dear readers: Would you pay income taxes if there was no threat to your personal liberty?

Reimagine a Republic where income taxes are voluntary. Citizens pay of their own accord, with no threat to personal liberty. What would happen? First, from an administrative standpoint the IRS would largely cease to exist. How much does is cost to actually run the IRS? As usual, nobody really knows. Estimates are in the $10-20B range or 35 cents per $100 collected. But that seems woefully low. I doubt the IRS is more efficient than PayPal's piggish 3% vig on every transition. Regardless, the vast majority of this cost goes away without enforcement.

A cursory knowledge of the Laffer Curve (which differs significantly from the current Gaffer Curve) reveals that productivity will explode with less taxation. Keep in mind, a large volume of Americans will still pay income taxes. Probably on the order of at least 40% based on their personal desire to support true civic utility, ie the proverbial collective defense, infrastructure, and benefits that this country has established. But the net effect of voluntary taxation will be the honing of budgets, collapse in corruption, and laser accountability of public funds because "representatives" will now be truly beholden to citizens, rather than corporations.

"It's dangerous to be an honest man," quips Michael Corleone in Godfather III. When there is rampant corruption and no trust, personal liberty needs to be threatened to pay taxes, otherwise no rational person would pay taxes. Representatives, do your duty to your true constituents or resign.

Let's reimagine this Civic Duty as one that aligns with our highest ideals as a nation. Participation is voluntary. Personal liberty is no longer threatened. Civic Duty becomes one of pride, not fear or indignation, and check images proudly sent to the IRS circulate like viral Twitter cat videos.