The Conditions for a Free and Vibrant Economy.

After recent comments by President Obama (see my last post), there followed a debate about the individual's role in the economy and that of the government's.

We have numerous examples where individual initiative and hard work led to successful enterprises (Thomas Edison, Henry Ford, Ray Kroc and Steve Jobs to name a few). What are the conditions for such individuals to succeed and what is government's proper role?

It is true that government at all levels can have a positive influence in promoting economic activity such as insuring the public safety, providing education and the building and maintenance of public roads. But what is the government's proper role in the regulation of business?

In an article in this weekend's edition of the Wall Street Journal (7/28 & 29) "Why Capitalism Has an Image Problem" by Charles Murray, the author states that any new government "intervention meet this burden of proof: It will accomplish something that tort law and enforcement of basic laws against force, fraud and collusion do not accomplish". He goes on to say that large enterprises can cope with regulatory burdens, such as the Dodd-Frank law, but those regulations can  crush small businesses and individuals trying to start small businesses.

In a separate article in the Journal on 7/23/12 ("Firms Pass Up Tax Breaks, Citing Complexity), John D. McKinnon cites numerous examples of tax breaks in the tax code that are so complex and costly to administer that many companies do not claim them. He states that "eligible businesses obtain as little as 5% of the main domestic tax breaks that they are entitled to claim".

Capitalism is defined as: "An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production and the distribution of goods that are determined mainly by competition in a free market". (Merriam-Webster Dictionary).

Any government that unduly intervenes in the free market system not only diminishes our freedom but threatens our prosperity as well. One could argue that we are well on the road to that conclusion and the results are evident for all to see.

The Choice is Clear: Stagnation or Prosperity

No doubt you have heard of President Obama's comment of Friday, July 13.  In part, he said:

"If you were successful, somebody along the line gave you some help. 

There was a great teacher somewhere in your life. Somebody helped to create 

this unbelievable American system that we have that allowed you to thrive. 

Somebody invested in roads and bridges. If you've got a business--you didn't build that. 

Somebody else made that happen". 

The problem with this argument is addressed in a blog written by James Pethokoukis writing for the American Enterprise Institute, quoted in the Wall Street Journal on July 17: "Few opponents of higher taxes are arguing that the most successful Americans should pay no taxes---" (in order to pay for public goods that the government provides). But Obama has added to this point  "---that there is no such thing as individual achievement or merit. All success is directly due to society's collective effort as manifested by government".

As a result of these recent comments by Obama (and past ones as well such as his comment of "spreading the wealth" in 2008), we now have a clearer understanding of his views. I  describe them as that of a community organizer applied to the national stage. That is a view that seeks to redistribute wealth by taking from the more successful and redistributing it to the less fortunate. It is a static view of the economy in which little or no growth can occur.

The opposing view relies on a system of free enterprise where individuals through their own initiative and ingenuity increase wealth through technological innovation and increases in productivity benefiting all. This view does not deny the government's role in providing the infrastructure and the ground rules necessary to insure fair competition. But beyond that, government should "get out of the way".

Any president's constituency should include everyone in the country, not just those to whom he would provide special favors or would benefit from his redistributive schemes (and vote for him). President Obama's views are divisive in that he attacks and demonizes those who are successful in growing the economy.

The choice in November is clear: To vote for an ideology that puts government at the center of our economy (and society) leading to economic stagnation or to vote for a idea that recognizes the right of a free people to pursue their own individual dreams and have the opportunity to succeed, leading to economic prosperity.

Some Random Thoughts on a Sunday Morning

1. The presidential campaign thus far has been described as lacking in excitement. Romney has been criticized as being non-inspirational; compared to President Reagan, he has been found wanting.
Obama is running scared and his campaign tactics show it; he is divisive and certainly not presidential.
I don't think that these criticisms will amount to much in Nov. The foremost problem we have is the economy, unemployment and a huge debt.  These are the issues that the public wants discussed and ultimately solved. Politically, style, excitement etc. may be desirable, but they are not enough. We had a candidate with plenty of style (and not much else) in 2008 and look where it got us. This time we want a president who is effective.

2.  Condoleezza Rice would be a worthy candidate for vice-president. She is smart, experienced and articulate. Her tenure as President's Bush national security advisor and Sec. of State would provide Romney with expertise in foreign affairs and the inner workings of government. But she has a couple of drawbacks: one, she is pro-choice which would be a problem for many Republicans and second, her role in the Bush administration would give the Democrats an opening to bring up the Iraq war and all that goes with it. In my opinion, Romney should choose someone that represents the future (such as Mark Rubio or Paul Ryan) and not the past.

3.  As I stated previously, Obamacare should be repealed and replaced. It will continue to be an issue in the campaign and rightly so. Consider:

     *It was approved by SCOTUS by rewriting the law and dismissing other facts that did not support its rationale. The Court's decision sets a very dangerous precedent and should be negated by repealing the law.
     *Obamacare will result in unprecedented government power and regulation. It gives government bureaucrats wide latitude in governing key aspects of health care that should be left to individuals and private organizations.
     *It threatens fundamental liberties by use of the individual mandate and by forcing religious institutions to participate in practices that they don't condone, such as abortion.
     *It increases our national debt to historical highs and risk the country's economic vitality for us and for future generations. One must ask what possible good Obamacare will do anyone if the underlying economy is bankrupt or near bankruptcy.
     *Finally, it increases taxes to areas and to levels that will adversely impact private initiative and our free economy.

4. The choice in Nov. is between two very different approaches to government. The liberal agenda relies on more government involvement and increases in public spending for infrastructure to stimulate the economy. The conservative view is to grow the economy by providing American businesses with the conditions to compete in a global economy. How we choose will determine what kind of country we have going forward.

I welcome yiur comments.

The Current Health Care Finance System is Broken and Should be Replaced

There have been numerous comments about the Supreme Court's decision upholding the Affordable Care Act (ACA) otherwise known as Obamacare.

Advocates of the ACA stress its goals of providing health care insurance coverage to more Americans and prohibiting insurance companies from denying coverage to those with preexisting conditions.  Those in opposition to the Act (as approved by the Court) point to its deficiencies primarily in the Act's mandates which limit individual freedom of choice, increased taxes (and the government's authority to impose them) and a rise in spending when we can least afford it.

Our current system for financing  health care is broken. Since it is based on reimbursement of fees charged and not a competitive price structure, it has grown in costs and inefficiencies. Efforts to fix it by top down bureaucratic micromanagement have only aggravated its problems. No amount of tinkering, including Obamacare, can fix it.  It should be replaced in its entirety.

The goals for a new financing system should be simplicity, efficient and sound health care administration, lower costs to the consumer and meet the constitutional criteria for individual rights of free choice.

Since our Republic's beginning, the system that has best met these criteria and been the engine of unprecedented prosperity has been that of free enterprise.  History has shown in this country and others that government run economies lead to a loss of individual freedom and economic stagnation.

The answer to the health care problem should be clear. As a start, Obamacare should be repealed and  replaced with a system of competitive private insurance able to compete in all states. Over time persons who become eligible for Medicare should have the option of choosing private coverage over the Medicare system.  In order to provide coverage to most persons, government could subsidize insurance premiums for a stipulated program for those in need. As to preexisting conditions, an assigned risk pool, preferably administered by the individual states, should meet the need.

Now is not the time for half-measures. On this Independence Day, we should strive for a health care financing system that respects the individual right to freedom and meets his/her health care needs.