Archive for March, 2013

Socialism’s next USA: The Next Detroit

Friday, March 29th, 2013

One of the most important things to remember about socialism – or coercion of any kind – is it fails eventually because human beings have an innate desire for liberty and a strong need for personal property rights. In fact, the origins of government lie in the need of agricultural communities to protect themselves from violence and theft. So it is particularly ironic that in more recent times, it is government itself that has more frequently played the role of bandit.

When you start taxing people at extreme rates to pay for socialist “benefits,” when you start telling them which schools their children must attend, when you start giving jobs away to people based on race instead of ability… you quash human freedom, which bogs down productivity and if continued for long enough leads to social collapse.

I find it perplexing that only 20 years after the collapse of the Berlin Wall, the West continues to implement laws that mimic all of the failed policies of our former “communist” foes. Our current president won the election by promising to “spread the wealth around.” But… truth be told… we don’t have to look to Eastern Europe or the Soviet Union to find a society destroyed by coercion, socialism, and the overreaching power of the State. We could just look at Detroit…

In 1961, the last Republican mayor of Detroit lost his re-election bid to a young, intelligent Democrat, with the overwhelming support of newly organized black voters. His name was Jerome Cavanagh. The incumbent was widely considered to be corrupt (and later served 10 years in prison for tax evasion). Cavanagh, a white man, pandered to poor underclass black voters.

He marched with Martin Luther King down the streets of Detroit in 1963. (Of course, marching with King was the right thing to do… It’s just Cavanagh’s motives were political not moral.) He instated aggressive affirmative action policies at City Hall. And most critically, he greatly expanded the role of the government in Detroit, taking advantage of President Lyndon Johnson’s “Model Cities Program” – the first great experiment in centralized urban planning.

Mayor Cavanagh was the only elected official to serve on Johnson’s task force. And Detroit received widespread acclaim for its leadership in the program, which attempted to turn a nine-square-mile section of the city (with 134,000 inhabitants) into a “model city.” More than $400 million was spent trying to turn inner cities into shining new monuments to government planning. In short, the feds and Democratic city mayors were soon telling people where to live, what to build, and what businesses to open or close. In return, the people received cash, training, education, and health care.

The Model Cities program was a disaster for Detroit. But it did accomplish its real goal: The creation of a state-supported, Democratic political power base. The program also resulted in much higher taxes – which were easy to pitch to poor voters who didn’t have to pay them. Cavanagh pushed a new income tax through the state legislature and a “commuter tax” on city workers.

Unfortunately, as with all socialist programs, lots of folks simply don’t like being told what to do. Lots of folks don’t like being plundered by the government. They don’t like losing their jobs because of their race.

In Detroit, they didn’t like paying new, large taxes to fund a largely black and Democratic political hegemony. And so in 1966, more than 22,000 middle- and upper-class residents moved out of the city.

But what about the poor? As my friend Doug Casey likes to say, in the War on Poverty, the poor lost the most. In July 1967, police attempted to break up a late-night party in the middle of the new “Model City.” The scene turned into the worst race riot of the 1960s. The violence killed more than 40 people and left more than 5,000 people homeless. One of the first stores to be looted was the black-owned pharmacy.

The largest black-owned clothing store in the city was also burned to the ground. Cavanagh did nothing to stop the riots, fearing a large police presence would make matters worse. Five days later, Johnson sent in two divisions of paratroopers to put down the insurrection. Over the next 18 months, an additional 140,000 upper- and middle-class residents – almost all of them white – left the city.

And so, you might rightfully ask… after five years of centralized planning, higher taxes, and a fleeing population, what did the government decide to do with its grand experiment, its “Model City”? You’ll never guess…

Seeing it had accomplished nothing but failure, the government endeavored to do still more. The Model City program was expanded and enlarged by 1974’s Community Development Block Grant Program. Here again, politicians would decide which groups (and even individuals) would receive state funds for various “renewal” schemes. Later, Big Business was brought into the fold. In exchange for various concessions, the Big Three automakers “gave” $488 million to the city for use in still more redevelopment schemes in the mid-1990s.

What happened? Even with all their power and money, centralized planners couldn’t succeed with any of their plans. Nearly all of the upper and middle classes left Detroit. The poor fled, too. The Model City area lost 63% of its population and 45% of its housing units from the inception of the program through 1990.

Even today, the crisis continues. At a recent auction of nearly 9,000 seized homes and lots, less than one-fifth of the available properties sold, even with bidding starting at $500. You literally can’t give away most of the “Model City” areas today. The properties put up for sale last week represented an area the size of New York’s Central Park. Total vacant land in Detroit now occupies an area the size of Boston. Detroit properties in foreclosure have more than tripled since 2007.

Every single mayor of Detroit since 1961 has been a Democrat. Every single mayor of Detroit since 1974 has been black. Detroit has been a major recipient of every major social program since the early 1960s and has received hundreds of billions of dollars in government grants, loans, and programs. We now have a black, Democrat president, who is promising to do to America as a whole what his political mentors have done to Detroit.

Those of you with a Democratic political affiliation may think what I’ve written above is biased or false. You may think what you like. But there is no way to argue that what the government has done to Detroit is anything but a horrendous crime. You may think what I’ve written above is merely a political analysis. Perhaps so, but politicians drive macroeconomic policy. And macroeconomic policy determines key financial metrics, like the trade-weighted value of a currency and key interest rates.

The likelihood America will become a giant Detroit is growing – rapidly. Politicians now control the banking sector, most of the manufacturing sector (including autos), a large amount of media, and are threatening to take over health care and the production of electricity (via cap and trade rules). These are the biggest threats to wealth in the history of our country. And these threats are causing the world’s most accomplished and wealthy investors to actively short sell the United States – something that is unprecedented in my experience.


Porter Stansberry


Obamacare boosts insurance by 32%

Friday, March 29th, 2013

With many Americans and businesses concerned about the impact of Obamacare, a new study from the country’s top group of financial risk analysts is providing fodder for those fears.

Underlying claims costs — which form the basis for insurers’ health care coverage premiums — will jump by one-third across the U.S. after the Affordable Care Act goes into effect next year, according to the Society of Actuaries.

But that increase won’t be felt evenly across the country because the study forecasts that some states will feel more pain than others. Among the hardest-hit will be Ohio, where claims costs will jump by almost 81%, and California, with a 62% increase.

Other states projected to see big increases in claims costs are Wisconsin, with an 80% jump; Indiana at 68%; Maryland, with a 67% bump; and Idaho at 62%.

What does that mean for individuals? If you’re already covered by your employer’s plan, not much. But if you’re uninsured or buy health insurance directly, the study indicates costs could rise for some people, according to The Associated Press.

The actuaries’ report is a blow to the Obama administration, which designed the new law to decrease the ranks of uninsured Americans and to whittle away the overall cost of health care. As many as 32 million Americans are expected to receive health care coverage through the law.

The study also supports criticism coming from many business owners, such as the Five Guys Burgers and Fries franchisee who complained earlier this month that Obamacare is forcing him to delay expansion plans and might increase prices. Top executives and franchisees for companies including Wendy’s (WEN -1.82%) and Whole Foods Market (WFM -0.58%) have also aired worries about the plan.

One problem: An influx of sick people joining the insurance rolls “will overwhelm the expected lower costs” from younger and healthier people joining the program, the study notes.

The Obama administration questioned the findings, saying costs will go down under the law, which takes effect next year, the AP notes.

The silver lining in the study is its finding that some states will actually see decreasing costs. Among those are New York, with claims costs sliding 14%, and Massachusetts, with a 13% decline.

“In simplest terms, the states that will see large increases generally have low current individual costs and those showing decreases have high current individual costs, with all states moving closer together but at a higher level overall,” said Kristi Bohn, a consulting health staff fellow at the Society of Actuaries, in a statement.

The Society of Actuaries doesn’t view itself as a political group, Bohn told the AP. “We are trying to figure out what the situation at hand is,” she said.

Aimee Picchi 3-27-13 Follow Aimee Picchi on Twitter at @aimeepicchi.

American freedoms compromised by the Duopoly of UPMC and Highmark

Wednesday, March 13th, 2013

SEE the article submitted to the Post Gazette in response to these two very good articles by Bill Toland of PG

1– Highmark’s ‘Community Blue’ patients rejected by UPMC-Right click link to open in separate window

2– Medical ethics focus of insurance dispute between UPMC and Highmark-Right click link to open in separate window

Here is response written to PG by Dennis Gabos, M.D.

Stooges of American Healthcare-Right click link to open in separate window

Rationing: here it comes — Death Panels

Monday, March 11th, 2013

A government-funded “mortality index” study – which helps doctors determine whether a patient has a “good chance” of dying within the next 10 years – raises renewed concerns about health-care rationing under Obamacare.

Federal grants from the National Institute on Aging and the American Federation for Aging Research helped pay for researchers at the University of California, San Francisco, to create a “mortality index” designed to aid doctors in decision-making about “preventive intervention” for older patients.

The index provides doctors with 12 measures to assign points to an elderly patient. The lower the patient’s total points, the better his or her odds of survival. The highest score, 26 points, represents a 95-percent chance the patient will die within 10 years.

The index assigns all male subjects 2 points automatically because men on the average have a lower life expectancy than women, the study noted. Men and women aged between 60 and 64 get 1 point; ages 70 and 74 get 3 points, while 85 or over get 7 points.

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