The Sanchez Report

Real Healthcare Reform

It's no secret that I've been a staunch critic of President Obama's domestic policy agenda. His attempt to shove Obamacare down the throats of the American people tops my list of reasons to oppose him. I'm amazed that he and the Democrats have been successful in their attempts to fabricate a health care crisis. How can we have a crisis when most polls show that 85% of the American people are happy with their health care? There's no doubt that something should be done to control the cost of health care. The question is whether or not he should have made this his top priority when unemployment is at 9.7%.

The card has been dealt and so where do we go from here. I've often been asked why would the Democrats move forward in the face of strong public opposition to Obamacare? They see this as a once in a lifetime opportunity to move closer to the liberal utopia of universal, single payer health care. They have longed for the day when the federal government would take over health care and move it from the private sector to government control.

The Democrats have combined the need for reform with their desire to provide universal coverage. These are two separate issues. This debate started in during the 2008 campaign and we were led to believe that there were 46 million Americans uninsured. According to Blue Cross, approximately 14 million qualify for an existing government program such as Medicare and Medicaid but have chosen not to enroll. Another 13 million have incomes above $50,000 and could probably afford some type of coverage on their own. In addition, there are 6 million who are considered "short term uninsured" or people who are in between jobs. That leaves around 6-8 million people who are chronically uninsured. That's a far cry from 46 million. Nevertheless, the question we need to answer as a nation is whether we should blow up our entire health care system in order to insure those who fall into the chronically uninsured category? The President's allies have accused their critics as obstructionists with no real ideas or alternatives. Nothing could be further from the truth. I'm no expert in this public policy area, but even I have a plan that makes more sense.

Several of my friends have asked me to step up and give my vision of health care reform and so I’ve taken them up on the challenge.  Here you go:

1) Health insurance should be easy, flexible and accessible like purchasing your car insurance. There should be plenty of competition across state lines. Your employee should provide a credit that YOU can use to purchase your own plan online. We shouldn't be forced to choose from just a few plans through our HR department. You should be able to customize your own plan, just like car insurance based on your family's needs. This would drive efficiencies in the delivery supply chain, which would lower costs.

2) Tort Reform- We should reform the laws concerning frivolous lawsuits. One of the reasons costs are out of control is because of the cost of malpractice insurance. Your doctor pays tens of thousands of dollars each year for insurance. They need to make up the cost by charging inflated rates for some services. This reform would lead to the biggest reduction in costs.

3) Young people in their 20's, who are relatively healthy do not need a traditional managed care health plan. They should have access to cheap catastrophic plans that they can tap into in case of an emergency. This would immediately cover most of the 6 million short-term uninsured who are in school or between jobs.

4) We need to change the law as it pertains to pre-existing conditions. People should not be prevented from purchasing health insurance or have their policy canceled because of a change in their status. This would lead to higher premiums, but those are costs that I'm sure some families would pay if they were just given the opportunity.

5) You would be left with 3-5 million families that truly need the government to pay their way. If that's the case, it would be far cheaper for the govt to provide a debit card with $300-400 per month to temporarily pay for their plan. That would amount to no more than $25-30 billion per year. Much cheaper than what President Obama is trying to push through!

Unfortunately, it looks like the Democrats are hellbent on ramming through their plan. If they were to take a step back and truly seek compromise, they would find that it is much wiser to fix health care in incremental steps. We still have the best health care system in the world. Leave it in the hands of the private sector.

Obama Refuses To Change Course

So here we are, one day later, digesting the State of the Union and my opinion hasn't changed. The President has essentially told the American people that he's going to stay the course and try harder to ram through his policies. It's disheartening to listen to the President give a speech that is drowning in denial. The White House has caved in to the far left view that the Massachusetts Senate race was in some way an endorsement of their policies. The spending will continue and the attacks on the private sector will only intensify as the President tries to convince voters that he is a populist. Mr. President, please hire some adults who know a thing or two about the economy. You've surrounded yourself with academics and politicians who don't have a clue about how the real world operates. God help us!

From the Wall Street Journal:

So much for all of that Washington talk about a midcourse change of political direction. If President Obama took any lesson from his party's recent drubbing in Massachusetts, and its decline in the polls, it seems to be that he should keep doing what he's been doing, only with a little more humility, and a touch more bipartisanship.

Mr. Obama's economic pitch also differed little from last year, when the jobless rate was 7.2%. He offered a spirited defense of the stimulus, though the jobless rate is now 10%, and he promised more of the same this year, especially on "green jobs." He also offered some minor if welcome tax cuts for small business, and $30 billion in handouts for "community banks" to be able to lend more.

Yet at the same time, he couldn't resist more banker baiting, and he promised that he's determined to see tax rates rise for millions of Americans next year when the Bush rates are set to expire. He also pushed more exports while saying he'll raise taxes on some of our biggest exporters, otherwise known as multinationals that "ship our jobs overseas." Mr. Obama believes he can conjure jobs and a durable expansion from the private sector while waging political war on its animal spirits. It can't be done.

This reflects a larger problem, which is his belief that economic growth springs mainly from the genius of government. Thus Mr. Obama presented a vision of an economy soaring to new heights on "high-speed railroad" and "clean energy facilities" and 1,000 people making solar panels in California. He seems not to appreciate that what really drives growth are the millions of risks taken each day by millions of individuals, far from the politicking and earmarks of Congress or the Department of Energy.

How's That $780 Billion Stimulus Package Working Out?

From PowerLine:

Another month has gone by, so it's time to check up on how the "stimulus" bill is doing. Innocent Bystanders has updated its invaluable chart, which shows the actual unemployment rate compared with the rates projected by the Obama administration, with and without passage of the "stimulus" bill; click to enlarge:

On Thursday, Joe Biden announced that the stimulus bill is working even better than had been expected. Biden's dissociation from reality is nearly complete, but one wonders: aren't there any journalists who are capable of looking up the administration's predictions and asking Biden fact-based questions? Or is that considered too much work?

California: Plenty Of Blame To Go Around

In case you've been wondering who is to blame for the mess in California, I found this article that pretty much sums it up. One caveat, the article does not go far enough to place blame on those who have controlled the Assembly and Senate for much of the past forty years, namely the Democrats. After all, they're the ones who are responsible for spending and have grown the annual budget from roughly $70 billion twelve years ago to nearly $150 billion today. The entire article can be found on Forbes.com:

The findings:

1. Arnold Schwarzenegger

The Terminator came to power with the support of much of the middle class and business community. But since taking office, he's resembled not the single-minded character for which he's famous but rather someone with multiple personalities.

2. The Public Sector

Who needs an economy when you have fat pensions and almost unlimited political power? That's the mentality of California's 356,000 workers and their unions, who make up the best-organized, best-funded and most powerful interest group in the state.State government continued to expand in size even when anyone with a room-temperature IQ knew California was headed for a massive financial meltdown. Scattered layoffs and the short-term salary givebacks now being considered won't cure the core problem: an overgenerous retirement system. The unfunded liabilities for these employees' generous pensions are now estimated at over $200 billion.

3. The Environment

In California today, everyone who makes a buck in the private sector--from developers and manufacturers to energy producers and farmers--cringes in fear of draconian regulations in the name of protecting the environment. The activists don't much care, since they get their money from trust-funders and their nonprofits. The losers are California's middle and working classes, the people who drive trucks, who work in factories and warehouses or who have white-collar jobs tied to these industries.

4. The Business Community

This insanity has been enabled by a lack of strong opposition to it. One potential source--California's business leadership--has become progressively more feeble over the past generation. Some members of the business elite, like those who work in Hollywood and Silicon Valley, tend to be too self-referential and complacent to care about the bigger issues. Others have either given up or are afraid to oppose the dominant forces of the environmental activists and the public sector.

Theoretically, according to business consultant Larry Kosmont, business should be able to make a strong case, particularly with the growing Latino caucus in the legislature. "You have all these job losses in Latino districts represented by Latino legislators who don't realize what they are doing to their own people," he says. "They have forgotten there's an economy to think about."

5. Californians

The last hope lies with those of us still enamored with California. We have allowed ourselves to be ruled by a motley alliance of self-righteous zealots, fools and cowards; now we must do something. Some think the solution is reining in citizens' power by using the jury pool to staff a state convention, as proposed by the Bay Area Council, or finding ways to undermine the initiative system, which would remove critical checks on legislative power.

CBO Director: The Federal Budget Is On An Unsustainable Path

The Director of the Congressional Budget Office confirmed what most of us already knew. Namely that the federal budget is on an unsustainable path. I'm sure the White House isn't happy with having another credible source weigh in on their reckless spending.

From the CBO Director's Blog:

Under current law, the federal budget is on an unsustainable path, because federal debt will continue to grow much faster than the economy over the long run. Although great uncertainty surrounds long-term fiscal projections, rising costs for health care and the aging of the population will cause federal spending to increase rapidly under any plausible scenario for current law. Unless revenues increase just as rapidly, the rise in spending will produce growing budget deficits. Large budget deficits would reduce national saving, leading to more borrowing from abroad and less domestic investment, which in turn would depress economic growth in the United States. Over time, accumulating debt would cause substantial harm to the economy. The following chart shows our projection of federal debt relative to GDP under the two scenarios we modeled.

   

 

Read entire post here

Obamanomics Is Moving Us In The Wrong Direction

The great Larry Kudlow once again articulates why the Obama economic plan is leading us down the road to economic demoralization.

From Townhall.com:

There’s no question that current government policies for taxes, spending, and regulation are causing the U.S. to lose competitiveness in the global race for capital, prosperity, and growth.

Of course, China has been moving in the direction of free-market capitalism for years. To some extent, this shows the positive benefits of America’s free-trade policies and its open-mindedness in helping nurture not only China growth, but also middle-class prosperity worldwide.

But what’s particularly galling about Obamanomics is that we may well be losing our competitive edge with Europe. While Europe is ever so slightly moving toward Reagan and Thatcher, the U.S. is shifting toward an overtaxed and overregulated model that smacks of François Mitterrand. That’s something no one should want to tolerate.

Heavy government controls at home, along with an income-leveling social policy couched in economic-recovery terms, is no way to run a railroad. At the simple stroke of a computer key, world investment flows to its most hospitable destination. That includes a reliable currency. But in President Bush’s last year and President Obama’s first, the U.S. has become a less-hospitable destination for global capital. That should worry everybody.

Read entire post here

Art Cashin Calls Stimlulus Package A "Hoax"

The Wall Street legend, Art Cashin, who serves as Director of Floor Operations for UBS Financial Services Inc. was interviewed today on CNBC and provided his view of the market. During the on air interview, he once again stated his belief that another stimulus package would be a waste of time and money, because the first package was "part illusion, part hoax." He further stated that the problems in the economy have not gone away and " the fire extinguisher is empty." He believes that the current stock rally will be short-lived but did not predict whether the pull back will be minor or a severe drop.

These comments are part of a growing chorus of the business community who are becoming more vocal in their opposition to the policies being offered up by the Obama Administration. The White House should take note and abandon its wreck less course. Somehow I doubt that they will listen. That's the problem with placing our economy in the hands of a group of academics and politicians who have never spent a day in the private sector. Ladies and gentlemen, our financial future is at stake and this is a battle of Theory vs. Reality. I'm pulling for Reality!

The White House Economic Team Forgot About One Thing... Higher Interest Rates

In my May 11th post "Deficits Soar", I predicted that the economy would show some short term positive sings and then interest rates would start to rise and suffocate growth. Well, it's happening sooner than I expected which doesn't bode well for the economy. The problem with the Obama economic team is that it's stacked with academics and politicians who live in the world of theories and now they're running into reality.

From All Business:

The Federal Reserve announced a $1.2 trillion plan three months ago designed to push down mortgage rates and breathe life into the housing market.

But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation.

That's the Catch-22 threatening to make an awful housing market potentially worse and keep the economy stuck in a funk. Kick-starting the economy requires higher spending, but rising rates mean fewer Americans will be able to refinance their home loans. And some potential buyers will be shut out of the market by higher monthly payments they won't be able to afford.

To understand how this is all connected, you have to think like a bond trader. Inflation is their enemy because it means the purchasing power of the dollars they receive when bonds eventually are paid off will be diminished. The only question is by how much.

GM Is Nationalized, Now What?

The great Larry Kudlow breaks it down like no other on Wall Street.

From Kudlow's Money Politics:

Isn’t it fascinating that stocks rallied over 200 points today, despite Obama’s command-and-control government takeover of General Motors? I think it’s because GM’s old-economy operation is yesterday’s story. The new economy doesn’t need GM. We’re only talking about 25,000 employees left in the car company’s domestic operation. Compare that to the millions of workers at new-economy companies like Intel, Microsoft, Cisco, Wal-Mart, Home Depot, Apple, and on and on.

Obama’s so-called GM rescue is a needless intrusion at huge taxpayer expense, and a political payoff to the union movement that helped elect him. And the central-planning mandate to produce little green cars at a domestic plant almost guarantees that taxpayers will never get their money back. Apparently GM cannot make these little green cars in China or Mexico and then have them shipped back to the U.S. for assembly and sale.

And we do not know the total compensation per hour for UAW workers — both salary and benefits — under the new agreement. That number hasn’t been published. So we can’t compare it to the compensation figures of the foreign transplants in order to measure competitiveness.

Good News For The Economy

The Man, The Legend, Larry Kudlow provided an interesting take on the current state of the economy. He suggests that we will see continued improvement in the short term due to the stimulus provided by monetary policy and an improved banking sector. This coupled with the thrashing of the communists in India will ensure that the world's second largest nation will continue to move towards a pro-growth, free market economy. The bad news is that the Obama's administration war against capitalism will no doubt bring this economy to a screeching halt longer term down the road.

From Larry Kudlow:

Stocks had a huge rally today, including a Dow gain of 235 points. This is a very important signal of economic-recovery confidence. At least that’s how I’m reading it.

The brief correction appears to be over. And all sorts of important technical breakouts were registered in today’s bullish trading. Despite the future threats from Team Obama about command-and-control economics, corporate tax hikes, nationalized health care, and the cap-and-trade tax, the most important reality for share prices is still the near-term expectation of a cyclical economic recovery.

Long-term prospects are not nearly as good because of the administration’s lurch to the left and war against capital. But the stock market has in its sights a second-half economic rebound that will carry through next year.

Most of this rebound is a function of massive Fed liquidity pump-priming and the steeply upward-sloping Treasury yield curve. These factors will stimulate total spending in the economy, coupled with bank profitability.