Follow up to Nationalization

For anyone who questions the need for the government to act quickly to remove the current leadership in the financial sector.

http://www.nytimes.com/2009/01/29/business/29bonus.html?_r=1&hp

Nationalize to Save Capitalism

We are experiencing an unprecedented man-made world financial disaster. There is a lot of blame to go around. Congress shouldn't have pushed laws to try and make it easier for the poor to buy homes. The government should have stopped China from manipulating its currency and flooding the world with cheap capital. The average American shouldn't have taken out loans they couldn't afford. But the vast bulk of the blame rests with the big banks and investment institutions. Your average American can't understand the complexities of these new mortgages. The banks should. It is up to banks to determine who to invest loans in. It is this important skill which justifies bankers' huge salaries and bonuses, and they failed completely.

When a business fails completely it needs to go bankrupt. If bad businesses aren't allowed to fail, we cease to be a capitalist country and become a corporate welfare state. Unfortunately, because of FDIC insurance and the need for people to access their accounts, we can't allow the big banks to go bankrupt. This leaves us with the only logical option: nationalize the banks, fire all the managers, and wipe out the shareholders. The goal should be to break up and try to sell off the banks as quickly as possible.

The argument against nationalization is that the government would do a bad job of running a bank. This is correct. I don't think the government could do a good job of run the banks, but I know for a fact the current CEOs have done a spectacularly horrible job of running the banks. They managed to turn trillions of dollars in stock into worthless paper.

The only alternative to nationalization has been to create a government "bad bank". The bad bank would buy up all the worthless assets from the banks at an above market value. It would be like bailing out the auto companies by having the government pay for hundreds of cars at a million dollars each. People who support the bad bank idea claim it was successful during the Savings and Loan crash in the 80's. The problem is that now, 25 years later, the same people want the same massive bailout--just larger. I promise you this: If we buy up the bad assets now, it will only be 15 years before they come back wanting an even bigger bailout.

Half Steps on Health Care are an Insult to America

Part of Barack Obama's huge stimulus package contains money to help states expand Medicaid (a perpetually broken program) and subsidize 65% of COBRA premiums for recently laid off workers. These measures are an insult to Americans in two important ways.

First, it will extend and promote already broken programs. Medicaid is chronically underfunded and does not properly reimburse doctors. As a result, few doctors accept Medicaid and almost always at a loss. Medicaid should use the same reimbursement plan as Medicare. In fact it is a foolish waste of money to administer two health insurance programs which serve the exact same function.

The COBRA is unusable and not surprisingly an underused program. It "allows" laid off employees to keep their health care at a HIGHER price than their employer paid. You may ask: how can a person who just lost their job afford to pay for COBRA? The answer is they can't. Even if the government subsidizes 65% of the cost of COBRA, the price normally runs $1,000 a month for a family. A parent without income is unlikely to be able to afford even the subsidized $350 a month premium.

More importantly, what the United States' health care system needs is a real fix, not a combination of short-lived and short-sighted band aids which do little to fix our problems. The Democrats control the presidency, the House, and the Senate. They have promised to deliver on universal health care and have the power to do so now. Unlike their stimulus package, which is of questionable value, a universal health care bill would immediately improve the lives of millions of Americans. Instead of attaching rather useless band aids to a boondoggle of a stimulus package, the Democrats should live up to their promise and get a real universal health care bill passed by February.

It is a New Day in America

Congratulation President Obama.

Deregulation: An Insult to Capitalism

The Republican's irrational push for complete economic deregulation is an insult to one of the nation's founding principles: capitalism. Capitalism has succeeded while other systems have fallen by the wayside for one simple reason: greed. Other economic/political systems have tried to ignore or eliminate greed, but not capitalism. Capitalism accepts that greed and ambition are inherit human qualities. Since they can't be eliminated, they should be exploited to produce prosperity.

While greed unleashed has a huge potential for good, it is still greed: the sin which is also the root of evil. Greed is a strong draft horse. If left to its own devices on the farm, it would destroy the crops. It needs to be put to the yoke and guided to get work done. The secret is the make the yoke as light has possible and make sure it does not choke the beast.

Anyone who has studied history should understand the insanity of deregulation for the sake of deregulation. It was the unregulated, profit-at-any-cost labor market that gave the world the slave trade. The unregulated food market gave us Sinclair's The Jungle and recently, poisonous Chinese baby formula. The unregulated capital market is that of the mafia loan shark.

There are great reasons to reduce some regulations. Foolish or overbearing regulations can unnecessarily cripple businesses. They can even drive segments of the economy into the black market. But regulation is necessary to produce trust and broad prosperity in society. To ignore the need for regulation is the ignore the reason capitalism works. The system is powered by greed, and greed will always encourage people to cut corners, run scams, and cheat. The Republican party should stop pushing for deregulation and work towards balanced regulation.

An Early Trip to Ghana

Something very rare recently happened in Ghana. A fair, open, and tight election ended with a peaceful transition. Sadly, such events are rare in Africa and seem to becoming rarer. The whole nation of Ghana should be applauded for their triumph and rewarded for their dedication to democracy.

Barack Obama currently has an unprecedented level of favorability throughout Africa. He should use his popularity to travel to Ghana and make it clear that America stands with, protects, and promotes democracies. The symbolism of America's first African-American president visiting Africa's most successful democracy would be powerful. A simple trip to Ghana could do more to promote the "freedom agenda" than all the billions spent fighting the war in Afghanistan and Iraq.

Obama is going to have the first year of his presidency filled with pressing issues. With the economy, health care reform, the war, and the conflict in Gaza, I can't fault Obama if he is forced to put Africa on the back burner. But it would be unfortunate to miss this amazing opportunity.

Caroline Kennedy a Danger to Democrats

A new poll from Public Policy Polling shows Caroline Kennedy in a statistical dead heat with possible Republican candidate Rep. Peter King, while Attorney General Andrew Cuomo would be in a clear lead. I personally put little faith in a single poll and even less in a poll taken two years out from the election. But the PPP poll, along with other polls showing Caroline Kennedy's popularity slipping, point to the biggest problem with her potential appointment to the Senate.

Caroline Kennedy is untested and (besides from high name recognition) unknown. It is possible that she could be an excellent senator and a great campaigner, but there is also the possibility that she could end up appearing like a deer in the headlights. She has never run for any office and never had to face an opponent in a debate. We have no idea if she is a great or a lousy campaigner.

New York is a very Democratic state. Unless there is a very pro-Republican political environment or an extremely weak Democratic candidate, the Democrats should be able to hold on to the New York Senate seat in 2010. It is almost impossible to imagine a proven Democratic candidate like Andrew Cuomo losing without a major scandal or political disaster.

An the other hand, it is possible to picture how Caroline Kennedy could end up losing. She might take positions out of line with the state, have a disastrous debate performance, or make a series of political missteps. Is it likely? No, but it is possible. Since she has never run for office we just don't know how she will hold up under the stress of a campaign.

Hibiscus: Completely Unrelated to Politics

Warning: this post is completely unrelated to politics.

Over the years I have correctly predicted several trends in new drinks/food. My newest prediction is that Hibiscus will by the new “hype” flavor/additive for health drinks.