Newsletter 73 - Spring 2014


Secure America’s

Future Economy

DC gridlock
– There have been many reports about dismal congressional job approval ratings, a record low volume of legislation, and members not reaching across the aisle as they supposedly did in years past. If our political leaders cooperated a bit more, some say, partisan gridlock could be broken and the government would work much better.

As public opinion on the issues of the day varies sharply in different areas of the country, however, one might expect the members of Congress from these areas to hold divergent opinions.  Aren’t they supposed to represent the views of their constituents?

Also, bipartisan cooperation provides no assurance that Congress will do good things.  Witness, for example, how House members of both parties joined forces to water down the flood insurance reforms enacted in 2012.  Bipartisan agreement to keep subsidizing seaside homes, Timothy Carney, Washington Examiner, 3/16/14.

Perhaps the partisan divide in DC has deepened in recent years; certainly many DC insiders have said so.  But don’t blame the rise of talk radio, Fox News, and the Internet. Partisan rivalries have always been part of American politics, going back to the day when printed newsletters, posters and word of mouth were the primary communication channels.

During the economic boom era that followed World War II, the government had plenty of money to spend.  The parties had their disagreements, of course, but they could and did find common ground by going along with each other’s programs.

Now the resources to support big government are drying up.  This makes it harder to resolve partisan differences in an amicable fashion, and the battles over spending and taxes have become increasingly bitter as a result. See, e.g., “We can’t keep spending like this,”

It’s time that Americans showed some appreciation for the fiscal conservatives in Congress, who are at least trying to keep the government’s fiscal problem from spiraling out of control.
Confront the beast
– Remember the old GOP slogan, “starve the beast.”  The idea was that if Congress would just cut taxes, which is always a popular thing to do, that would force it to cut spending too so as to avoid running up the debt.  What a neat way to get a tough job done without working up a sweat!

In the 1970s, when tax rates were still quite high, the STB theory may have been a good strategy.  Among the prominent conservatives who embraced it were Ronald Reagan, Jack Kemp, Dave Stockman, and George Will.  But over time, the result was to undermine fiscal responsibility by breaking the perceived link between deficits and tax increases. Tax cuts and “starving the beast,” Bruce Bartlett, Forbes, 5/7/10.

In effect STB became a substitute for spending restraint among Republicans. They talked themselves into believing that cutting taxes was the only thing necessary to control the size of government.

While it may be apt to visualize big government as a “beast” that must be cut down to size before it devours too much of the country’s resources, fiscal visionaries should not be diverted from the real job – controlling outlays so the government will remain on a sustainable spending path.  In other words, don’t “starve the beast,” which could make it dangerous, but confront the beast head on and get spending under control.

Healthcare predictions – On March 21, Christopher D. Casscells, MD spoke to the Retired Men’s Luncheon Club about “The Affordable Care Act – A Bitter Pill.”  As an orthopedic surgeon and the medical policy director of Caesar Rodney Institute, Dr. Casscells can speak with authority on the outlook for healthcare in Delaware and nationally.

For decades, healthcare has been in an inflationary phase due to government subsidies that created a disconnect between the consumption and payment for services.  This is about to change.  There simply is not enough money available for a rapidly growing number of beneficiaries to receive the finest medical services available, and the implementation of GovCare will hasten the onset of a deflationary phase that was already destined to happen.

Consider how things will look for an established physician who devoted 15 years of his/her life and racked up $250K in debt to get trained and established in the medical profession.  Faced with demands from insurance companies and the government to see more patients, fill out more paperwork, and assume more onerous conditions (e.g., be available 24/7), older doctors will be inclined to take early retirement or assume new roles (e.g., employee of a healthcare service provider). 

Younger doctors may go with the program, handling more medical procedures on an assembly line basis, but they will avoid problematic patients (e.g., people with back problems that are not assuredly fixable) and have limited interaction with patients.

From a patient perspective, look for marginal hospitals and clinics closing, fewer doctors to see patients, and more medical services performed by nurse practitioners or nurses. Some of these changes may seem innocuous, but the cumulative result will be a lower standard of medical care with longer wait times (i.e., de facto rationing). 

When the dust settles, we will have a two-tier system. Baseline healthcare will be provided for everyone, with government subsidies as necessary.  Blue ribbon healthcare will be available on a pay as you go basis for people who are willing and able to pay for it.  The only silver lining is that prices for medical services will be trimmed when they become the subject of negotiation with consumers versus the government or insurance companies.

Counting puzzle – A bin contains 10 pairs of shoes: five black, five brown.  How many shoes must you pull out to be sure you have a matching pair?  Answer on page 4.

Land of the free – As SAFE previously reported (9/30/13), a uniformed campus police officer at a junior college in California ordered a student to stop passing out pamphlets containing the text of the Constitution on Constitution Day because he had not obtained permission. The school’s rule required a reservation for the designated “free-speech area” on the campus, and someone else was using it.  Really, isn’t the whole country supposed to be a free-speech area? 

The student was supported by the Foundation for Individual Rights on Education, and the ensuing lawsuit was quickly resolved in his favor.  Modesto Junior College paid $50K and agreed to revise its policies to allow free speech in areas across the campus., 2/25/14.

And here’s another case, involving a citizen who attempted to videotape police officers making an arrest.  They told him to stop; when he did not do so, they confiscated his cell phone and deleted videos on it.  Four years and an ACLU-backed lawsuit later, the city police dept. agreed to pay damages, issue an apology, and rewrite its arrest policy.  Landmark settlement reached in Preakness case, CBSBaltimore, 3/12/14.

Minimum wage – The president is actively advocating a 39% increase in the federal minimum wage – from $7.25 to $10.10 per hour – and the proposal is said to be quite popular.  We don’t think, however, that it is a very good idea.

The rationale is that low-wage workers need to make more money, so let’s require employers to pay it.  But if one believes in the free market system, why should the government intervene in this fashion?  Rather, wage rates should be set by supply and demand, like other prices in the economy.

 Some economic studies indicate that moderate increases in the minimum wage can be decreed without significant job losses, but the Congressional Budget Office has estimated that the increase to $10.10 would cost some half a million jobs – thereby aggravating an already depressed employment situation.  What would happen to the workers whose wages were reduced to zero;  would they be doomed to become wards of the welfare state?

Also, a higher minimum wage will force employers to raise their prices and/or cut services.  This point tends to overlooked by proponents, and even opponents, of raising the minimum wage.  See, e.g., “NJ supports raising federal minimum wage to $10.10 per hour,” Delaware Chatter,

 It seems curious that none of these three pieces, even Mr. Ponnuru’s column, mentions that increasing the minimum wage would be likely to increase the price of Big Macs, etc. or detract from service levels as employees are eliminated, to the detriment of the general public.

The situation should not be viewed in a vacuum either, for the job-killing aspect of the minimum wage is reinforced by  economic policies that are undermining the incentive of marginal workers to seek jobs, e.g., unemployment compensation, welfare programs, disability benefits, and now GovCare.

Moreover, the cost of all of these programs is being shifted to the productive sector of the economy.  Tax work, subsidize idleness, and batten down the hatches,

Two little words – There is a trap for the unwary under Medicare rules that readers should be aware of.  Say you suffer a serious injury, and spend several days in the hospital followed by costly rehabilitative services.  Unless the hospital classes you as an “in patient,” you may wind up paying all of the rehab.

Thus, Ruth Felton of Tiburon, California, 95, suffered a fall at home and was taken by ambulance to the emergency room, where doctors found she had broken her pelvis.  She stayed in the hospital for three nights, in part because doctors told her children that Medicare would pay for rehab. 

Ten minutes before Felton’s discharge, her daughters learned that she had been classified as “under observation,” meaning Medicare would pay nothing for follow-up nursing care and rehab – and they would be responsible for the entire $17,000 bill.  The decision is being appealed, but the family may not win and in any case the experience has not been pleasant for them. 
Hospitals have incentives for avoiding the “in patient” classification under Medicare rules, e.g., ensuring they don’t run afoul of new GovCare penalties for readmissions of any given patient.  Moreover, Medicare has adopted a practice of challenging reimbursements up to 3 years after the fact, paying a commission to contract investigators (aka “bounty hunters”) who suggest successful challenges.
In such a situation, the patient and/or family members should request “in patient” classification at the time of admission, thereby maximizing the chances for favorable treatment.  It’s the old principle that “the squeaky wheel gets the grease,” and in any case they will find out what to expect up front.  Frustrating Medicare catch, Jim Angle, Fox News, 2/6/14.
Counting puzzle (answer) – The book answer is 11 shoes, but you can cut the number to 2 shoes by looking.

Video corner – A tea party message (narrated by Senator Ted Cruz): These are not typical times . . . there is nothing extreme about believing in the Constitution and free market system . . . we need to make DC listen.  12/13/13, (2:16)

SAFE Board
Andrew Betley, (302) 239-9679
Suzie Dickson
Edgar Fasig, treasurer, (302) 999-0611
Dan Kerrick, (302) 658-7101
Steve McClain, (302) 998-3910
Jerry Martin, (302) 478-5064
Ryck Stout, (302) 478-9495
Bill Whipple, president, (302) 464-2688
For e-mail addresses go

Secure America’s Future Economy (SAFE)
SAFE is a non-partisan, all-volunteer organization that was founded in 1996.  We advocate smaller, more focused, lower cost government, to be achieved by cutting spending, restructuring “entitlements,” simplifying taxes, and rationalizing regulations.
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