Where Did My Capitalism Go?

There’s been a lot of talk about the legislation that was hastily passed by the House this past Friday night. The “American Clean Energy and Security Act” as it is called, is around 1200 pages long, and apparently already has another 300 pages of amendments which were added shortly before it was passed in a narrow 219-212 House vote. In short, this bill is long: there is a lot of stuff going on here. I’ve taken the liberty of downloading a version of the bill (before the 300 pages of amendments were added) to review myself and I’d like to address a few choice sections of it here, including my opinion on why these new laws are no good for the American taxpayer. I urge all readers to also review the text of the bill and educate themselves on the major shift in federal legislation that is currently taking place.

The first portion of the bill I’ll address is “Section 201 - Greater Energy Efficiency in Building Codes” which calls for a national building code energy efficiency target of 30% reduction in energy use as dictated in local building codes at the time of adoption of the bill in 2009, and 50% reduction in building energy use by 2015. The bill requires state by state adoption of these targets to be written into new building codes within a year after the adoption of the federal law. Each of those building codes must also be approved by the national overseer, the Secretary of Energy, as meeting the targets set forth by the bill. The fact that the government needs to use the states as a vehicle for this shift in building code (a responsibility solely entrusted to the states) is evidence of the federal inability to dictate and enforce such legislation. This change, if adopted by the states, would cause major hardships for the construction industry, not only for builders but for architects, engineers and local jurisdictions, burdening all involved with the extra cost of acheiving this reduced energy consumption target that will ultimately reflect itself in higher housing costs.

The bill realizes that, by its own actions, the cost of energy to the consumer will be increased. This is exemplified by the text in “Subtitle B, Section 432 - Energy Refund Program for Low Income Consumers” which gives refunds to those who can’t afford to pay for their energy consumption. This section is a built-in method for the government to chip in on the increased cost of energy that will result from this bill. Again, the administration of this program also falls on the states who will need to create new beauracratic infrastructure for the pay out of refunds to consumers that can’t afford the energy they buy. The bill also does not specify a budget for the expense of this new program as is customary with legislation funded by taxpayer money.

The final section, which has gotten much more media attention than those previously discussed is the latter portion of the bill, “Title VII - Global Warming Pollution Reduction Program”. This is the basis of what is also referred to as the “cap and trade” program. This section of the bill sets limits on the carbon emissions that companies and industry can, well, emit. The bill allows those that fail to reduce their own emissions to buy credits or offsets from other entities that have been successful in that endeavor, or by investing in sources of renewable energy and thus playing the carbon offset market. The bill sets regulations for the offset market, and targets for reduction of greenhouse gas emissions. The issue here, again, is the increased operating cost transferred to the businesses affected by this legislation. Companies will be forced to limit their production, find new manufacturing methods or be forced to buy offset credits. This will inevitably cut jobs, increase research and development costs, and increase operating costs in an attempt to compensate for money dedicated to adhering to these new regulations. This increased cost to American businesses will be transferred to the consumer…why else would such a provision as the Energy Refund Program be made in the bill?

The provisions of this latest legislation passed by the House, in my opinion, will have detrimental effects on the American economy, the power of states to write their own building standards, the value of energy for the consumer and supplier, and the perception of what climate change means for the American taxpayer. American people across all classes will be affected by increased taxes to support the local, state and federal beauracracy needed to enforce this legislation, and by increased energy costs that the American business will need to pass on to the consumer in order to adhere to new emission and energy efficiency standards. Please read this bill and learn about its contents. The American standard of living and free market are under severe threat.

I read this opinion piece about the current health care proposal of a public insurance system being reviewed by Congress and started to consider the main question being asked: why should private insurers fear the proposal of a public insurance system? The article had some good thoughts but, in my opinion, the author didn’t give an adequate answer to his primary question. I’ll give you my take on the issue here.

From what I can deduce, private insurers may fear the current proposal because a public insurance system would be cheaper for the insured, meaning the private insurers prices would have to be lowered in order to adequately compete. But one of the main reasons the private insurers prices are currently so high is that they need to buffer against today’s uninsured. The fact that uninsured persons still use the healthcare system without being able to pay for their care translates into an increased price for that care across the board (a cost that private insurers currently have to roll into their price). If a public healthcare system is created, those costs will decrease allowing the private insurers to better compete with the public plan. The problem then becomes the transfer of the cost for the publicly insured into higher taxes for the citizentry.

The money to pay for a public health care plan is the main sticking point: those who most need this plan are often the least able to pay for it. Given the current make up of Congress, I expect the cost of this public insurance to be pinned on the middle and upper classes in the form of increased taxes. I don’t believe in paying for the needs of others. Those who don’t make enough money to provide adequate health care for themselves should not force those who can take care of themselves into an involuntary position as social provider. The screening process for such a public program shoud be rigorous enough to determine actual need based on an inability to work and provide for yourself (something the government should have plenty of experience with by now, and yes, you can read that as a jab at welfare).

The private insurance companies should have little to fear. Ultimately, you get what you pay for, and I guarantee that the service and quality of healthcare will be worse for those under the public plan. The private insurers will remain the providers of quality care, probably at less cost to the insurer. The ones who will bear this burden are the taxpayer, mainly those who want to maintain their level of care by remaing privately insured, but find themselves in debt for the health care needs of those that choose to use the public option.

The last article generated a great response so I want to continue along the same general topic: whether or not the government should be charged with protecting the people from themselves, specifically pertaining to the recent tobacco legislation signed into law. The legislation places heavy restrictions on tobacco marketing, primarily to thwart the youth of America from becoming smokers, but also to raise general awareness about the hazards of smoking.

While in the past the tobacco lobby was a definitive wall against such legislation, this time around Philip Morris USA, the nation’s largest tobacco company, turned the tables and seemingly supported the legislation outright. This drew heavy criticism from other cigarette makers with lesser market share that said this new legislation would hinder them from winning a greater portion of the consumer base. Honestly, I have to hand it to Philip Morris…they saw an opportunity and took it. Who needs marketing anyway when you already have the customer addicted to your product? But I digress…

The question is: Does the government really think that covering 50% of a cigerette package with warning labels will deter people from smoking? The health hazards of tobacco are quite well known among the American public. We know that nicotine is addictive, so if you get into the habit, it will be very hard to stop. We know that smoking often leads to cancer, and ultimately reduces one’s life expectancy. I don’t think it’s the label on a package of cigarettes that entices the buyer. The product is what people want (and in a lot of cases, need). I don’t see tobacco sales drastically declining due to this legislation, just for that reason. If the government wants to continue to protect its people from the harmful habit of smoking, they should expect a long term, generational fight; one that should base itself on a new way of thinking rather than reactionary deterrents to the industry.

The most effective thing that the American people (government included) can do to curb the habit of smoking is to educate the youth of the nation. This already happens to a certain extent, but obviously our country (among many others) still has an issue with underage smokers. Banning the sale of candy-flavored cigarettes is a lame solution. A better idea would incentivize good parenting practices; for instance, a program that would give a tax-break to parents that kept their kids from smoking for a set amount of time. Truthfully, I’m against anything like this idea or the new laws since I don’t believe parenting or the tobacco market are any of the government’s business. But if the government’s going to intrude anyway they should address the root of problem (lack of attention when parenting) and not punish tobacco companies for diversifying their product line by reducing their marketing capability.

Well I’m sure that most have already heard about the new regulations over the financial system the Obama administration is proposing. Increased programs for consumer protection, more power delegated to the Federal Reserve when they’re faced with institutions deemed “too big to fail”, and increased federal oversight on certain types of products within the financial system are some of the hallmarks. Don’t mind me if I get a little philosophical here but, what is the purpose of government? Is it to protect people from themselves? To protect them from ignorance? Do we need the government to tell us what the risks are when buying stock, or how much we can truly afford when we’re considering a home mortgage?

At what point did people stop thinking for themselves, and start relying on the government for protection from their own mistakes? I can understand a government that provides services and functions to the taxpayer like interstate highways, and civic education, and even a standing military, but do we really need our government in the business of determining financial risk? I’m sure that this whole idea of government as its brother’s keeper got its start with FDR in the Great Depression (talk about seizing a great opportunity).

Think about social security and the federal deficit at the exact same time: Do you really think the US government is better at managing your money than you are? I, for one, do not, and now we see that more of the money promised to the government by the taxpayer is being spent on further public and private oversight. Still, every working American is forced to contribute a portion of their earned money to a program that protects them from an ill-prepared retirement when in its essence social security defeats the forward-thinking mind by rewarding the poor financial planning of the non-saver. The more power we vest in the government, the weaker we become.

I believe this weakness is what drove us to where our economy and understanding of governmental purpose is now. Did we expect the person selling us a house to say, “Maybe you can’t afford this…”? Did the buyer expect a federal agency to verify that each of the loans delved out to first-time buyers were appropriate for their level of income? Maybe some people were expecting that kind of protection. Either way the “security” that some seek may soon become a reality. What we’re seeing proposed is a patchwork of reactionary oversight aimed at strengthening the federal government’s role as the central network through which business transactions are processed. The role of government is shifting further away from its purest purpose as a servant of the people, and becoming more like a savior. I hope I’m not the only one that doesn’t want to be saved.

So far this blog has talked a lot about what is wrong with the most recent steps taken that are dismantling the free market capitalism we have enjoyed. In this entry I’d like to diverge from the negative, and focus on what we can do to let the key players know that their moves away from pure capitalism are highly inappropriate and unhealthy. Let’s focus on two basic ideas for now:

1) Boycott companies that have received federal “bailout” money. Make it known that you are not buying products from those companies, or banking in those institutions, for that specific reason. One of the most powerful ways to make your voice heard within a capitalist system is to use your money. A purchase from one company over the other says that you chose that seller consciously over their competitor. If you publicly express why you entrusted your money to a competitor (or just didn’t buy from a bailed out company) your “money-used-as-a-statement” becomes even more effective. Whether you tell your friends by word of mouth, write an editorial in your local paper or publish your opinions in a blog …anyway you’re able; let the world know your opinion regarding who deserves your dollar the most. A good list (mostly of banks and auto companies) that received federal money can be here.

2) Express your sentiment to your local, state and federal representatives. Talk to the government officials that supported the doling out of taxpayer dollars to failing companies, and let them know that they did a disservice to your community. Let them know that what they did was not in the best interest of their constituents, and that their actions do not represent the values and principles of the US Constitution which they are charged to uphold. Tell them also that come election time, they will not have your vote and that you intend to rally others to vote against them. Then, back your words up with actions.

Tell your representatives that did not support these federal aid packages that you agree with their decision, and admire their willingness to stand up to political pressures in order to preserve the values that we hold dear. Assure them that come election time, they will have your vote as long as they continue their stance upholding the free, capitalistic nature of our society. Then, take action and spread the word that this representative did what was right and voted down the bailout legislation.

This page has a comprehensive list of the US congress votes on the initial bailout package, though I would encourage all to seek out more information regarding any additional legislation recently passed that is of the same ilk.

I’ll be posting more about what an individual can do to get their opinions on the state of capitalism heard in the future, but consider this a good start. If anyone has more ideas feel free to start a discussion on the blog by commenting or email andrew@wheredidmycapitalismgo.com with ideas.