Archive for October, 2013

Enforcing Obamacare Fines

October 31, 2013 2 comments

Some time ago, I read a claim that it was quite easy to evade the Obamacare fines. I stumbled upon a news article (read it here) that confirms this claim. To avoid the fines, just make sure that you don’t get a refund from the IRS.

It appears that Obamacare instructs the IRS to deduct fines from any refunds owed to taxpayers. If there is no refund, then what? Well it appears that the IRS will just carry over the bill until the next tax return is filed, collecting the fine at that time. But if there is never a refund, the only recourse is for the IRS to ask the Department of Justice to sue taxpayers for the fines. Think about this. How entertaining would it be to see high-priced U.S. attorneys trooping into what amounts to a small claims court trying to get taxpayers to pay a $95 fine? This would be hilarious to see. I think I’d pay money to see this show!

Obviously this enforcement scheme has no teeth. Why would politicians do this? The only answer that I can imagine is that, after deceiving taxpayers by promising  that the IRS would not be involved with Obamacare and because of the lack of public support for this so-called health care reform, Democratic politicians probably tried to avoid making taxpayers any more hostile to the law than they already were. The result may be that the whole Obamacare system collapses when people ignore the fines and only buy insurance when they are sick. Ironically, if this happens, there may be more people without insurance than there were before Obamacare was passed.

Obamacare really is the gift that keeps on giving. If there was ever a program illustrating the profound incompetence of politicians, this is it. I hope that this lesson is not lost on the public and never forgotten.


The Exchange Fiasco Is Only the Beginning

October 31, 2013 1 comment

The Affordable Care Act (AFA) is a stunning example of just how destructive a government can be when it chooses to play central planner of markets. Here is a partial list of the wreckage caused by Obamacare.

1. Layoffs of workers in the medical device industry due to the tax on medical devices in the AFA.

2. Hours reductions have been imposed on part-time workers so that employers can avoid the requirement to provide health insurance.

3. Staggering price increases in the price of health insurance.

4. Millions of individuals losing their health insurance policies cancelled as a result of the AFA.

5. Individuals are often being forced to buy coverage that makes no sense. Do people in their fifty’s really need maternity coverage?

It is hard to think of any other legislation that has wreaked havoc on this scale. Unfortunately, the worst damage is yet to come. Obamacare may destroy the private health insurance market altogether. Read more…

Why Economies Die

October 29, 2013 1 comment

Niall Ferguson is an historian at Harvard University. I just finished reading his book, entitled The Great Degeneration.  I highly recommend this book but I should warn readers that it is not a happy read. The book attempts, in a scholarly way, to document the events that can lead to the decline of a society. Reading this book leads to the inescapable conclusion that the U.S. is in decline since many of the causes of decline listed by Niall Ferguson can easily be seen in the U.S. I can’t mention all of the issues discussed in this book but there is one that I want to highlight here and that is the decline in the rule of law.

Economists are aware that one crucial role of government is the enforcement of a legal system. There can be no wealth creation in a capitalistic society if property rights are not enforced and, for this and other reasons, we need a government to implement and enforce the laws on the books. Ferguson mentions that we are now seeing laws that are sloppily written and enormously complex so that the implications of such laws are unknown to the very politicians who pass them. The Affordable Care Act is a law whose details were not known at the time of passage and a recent court case underscores this problem of sloppy construction. Read more…

Gun Control and Incentives

October 24, 2013 Leave a comment

The news today brings yet another tragic story of a shooting in a U. S. school. What usually follows such a terrible event is a call by some people for gun control which supporters think will reduce gun violence. To an economist, these claims seem strange because economics, if it is about anything at all, is about the effects of incentives on people’s behavior. Research in economics is almost always a form of test for the effects of incentives. Gun control does not change incentives and so it would seem to an economist that gun control would have no effect on the desire of people to use guns for legal and/or illegal actions. Interestingly, there is evidence on the likely effects of gun control and that evidence is the U.S. experience with Prohibition.

In 1919, the U.S. passed a constitutional amendment effectively setting the legal supply of alcoholic beverages to zero. The federal government then set about prosecuting anyone violating this restriction but clearly the amendment did not reduce the demand for alcoholic beverages to zero. What the amendment did was create a supply of illegal alcoholic beverages provided by underworld figures and so the market for alcohol continued to exist although it may have been at somewhat reduced levels of sales. Prohibition did not change the incentives faced by people wishing to consume alcoholic beverages and so they continued to demand these beverages and a supply side of the market was created to meet that demand. Eventually in 1933, Prohibition was repealed so a legal supply of alcoholic beverages was restored.

To an economist, the way to reduce gun violence is to change the incentives faced by individuals who carry out violent acts using guns. There should be some evidence out there which might tell us the effects of incentives on gun use. If I can find some I will report it in a future post.

Categories: Uncategorized

Blog Suspension

October 14, 2013 Leave a comment

This blog was taken down last week for a short time and I wanted to explain what happened so that there is no misunderstanding about the circumstances surrounding the suspension.

When I posted the last entry regarding the Obamacare exchanges, a link was inserted into the post which violated the Terms of Service that WordPress, the host for this site, maintains. The blog was immediately suspended once the post with this link was published.  I later realized that the blog was unavailable, had no idea why it was suspended, and so contacted WordPress about the problem. A WordPress representative responded to my email promptly, explained the problem, and told me how to resolve the situation. I followed the instructions provided, informed WordPress of the fix, and they promptly reinstated the blog. WordPress and its representatives handled the situation efficiently and professionally at all times.

To be clear, the content of this blog had nothing to do with the suspension of this blog last week.

Categories: Uncategorized

The Insurance Exchange Fiasco

October 9, 2013 Leave a comment

Blogs are in part for fun and maybe even for self-indulgence. I have decided to indulge myself a bit by imagining what it would have been like if the famous Google search page came online in the same way that the insurance exchanges started. It might have gone like this.

The search page goes live and it is immediately overwhelmed by internet web traffic so that almost nobody is able to successfully complete a search for information using the page. Later in the day, Google’s senior management holds a press conference where they say the following. “Today our new search engine went live on the web and it was a complete success. The site was overwhelmed by web traffic so that almost nobody was able to search for information. This shows how valuable and important our search technology is to the public.”

This is effectively what Barack Obama and other members of his administration did when describing the performance of the medical insurance web site. The designers of the site completely failed to anticipate how much web traffic capacity was required for people to properly use the site. They then tried to describe this failure as a sign of success. Only in government would incompetence be described as competence. I suspected that there were going to be problems with the exchanges when I heard a report that the CTO for Health and Human Services left HHS to take another job. Yes he could have left because a good opportunity came along but he also may have been bailing out because he saw a disaster emerging.

The President likes to talk about “smart” government. Are the exchanges an example of this? Actually, my guess is that the medical exchanges will ultimately provide evidence of the continuing incompetence of government (Will your information really be secure on these web sites?) and that the managers of government, politicians, cannot effectively manage the organizations that they claim to supervise.

The Corruption in a Democracy

October 9, 2013 1 comment

In watching the reporting on the government shutdown, I could not help but be reminded of a comment made by a friend that the ancient Greeks did not regard democracy as a viable form of government. The reason for this view was that the Greeks believed that democracies were inherently corrupt because members of the public would gain access to the public purse by bribing politicians, in one way or another, for subsidies that would line the pockets of the public. The Democrats, and many Republicans, regard all of government spending to be untouchable. In my opinion, many of the spending programs of the government are vote-buying schemes and these are excellent examples of the corruption described by the ancient Greeks. Consider just a few of these spending programs that politicians defend. Read more…

Economics One

A blog by John B. Taylor

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One economist's views on economic policy.

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