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Aetna’s decision to withdraw from 11 out of 15 state exchanges is a big deal; it follows the paths of UnitedHealth Group and Humana, both large insurance companies who have also chosen to cut ties with Obamacare. (Incidentally, the DoJ is trying to block a Aetna-Humana merger; are they worried about competition?)
A short analysis by Market Watch provides some insight into the decision and the current state of Obamacare:
**Aetna explained the decision as a way to “limit our financial exposure moving forward,” after pretax losses of $200 million in the second quarter and losses totaling $430 million on individual products since January 2014. The company did not specify what portion of the losses was attributable to individual public plan offerings.
**The company criticized the ACA’s “inadequate” risk-adjustment mechanism, which is meant to limit insurers’ losses as they start covering sicker individuals. It’s a common criticism from health insurers, which have long said that the risk-pool program isn’t working the way it’s supposed to, though others say big insurance companies should instead change their model to keep costs down.
**Of Aetna’s exchange membership this year, more than half is new, with those needing expensive care making up “an even larger share” in the second quarter, the company said.
**Coupled with the risk pool, this makes premiums costlier and “creates significant sustainability concerns,” the company said.
The affect of these withdrawls means fewer insurers and fewer choices for consumers than when the law first began several years ago. That’s not good. The law needs some reform. MarketWatch notes, “The Centers for Medicare and Medicaid Services has indicated a willingness to make changes to the risk-pool mechanism, although it’s unclear whether legislation to that end would be passed.
Any fixes will also depend on strong enrollment figures. Premiums have increased for 2017, but the financial penalty for not having health insurance has also increased. Whether that penalty, an average of $969 per household, according to a Kaiser analysis, will prompt increased enrollment is a “big wild card,” according to a co-author of the Kaiser report. A rise in premium costs “suggests additional enrollment growth is not a given,” said Riggs, having potential negative implications for hospital and managed care, along with investors in those spaces.”
Will this have an impact on the 2016 election? It will be interesting to see — especially since the open enrollment period is slated to begin on November 1, just days before the 2016 election. The cost of premiums, especially if they are substantially higher, may affect people’s voting decisions. Of course, don’t put it past the Administration to delay open enrollment until Nov 15 and shift everything by two weeks, in order to avoid a “November surprise”. The only thing that’s not a surprise at this point is that the law continues to founder considerably, at the expense and disruption of everyday citizens.
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I recently posted an article from the National Review, which was an update from a previous article written 20 years ago — in 1995 — on the same subject: Hillary Clinton’s too-good-to-be-true commodity trading luck. The article provides an excellent analysis on all the things inconsistent with Hillary’s trade activity from the 1970s, documented the inconsistencies with Hillary’s explanations of how she seemingly got lucky, defied the odds, and made large sums of money.
Here’s a primer on commodity trading, and why Hillary Clinton’s trade deals are important for this election cycle. It’s very clear for anyone that Hillary really didn’t do any trading as she claimed; she allowed her broker to execute trades on her behalf.
With commodity trading: say you want 100 shares of X. You buy it with your trader, the trader goes down to the floor, does the transaction, it gets recorded under your name, and that’s that. So for instance, if you are buying futures — say 1000 head of cattle at a certain price — you are not actually buying the cattle, you are buying a future price. That means, you buy what you think the price will be at a certain point in time. With commodity trading you have the right to buy or sell these contracts, you have margins in which to operate,, and you can end up earning money or losing money if the price fluctuates widely.
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Now back in the day when Hillary was trading, the futures were often handled differently than they are currently. The brokers were so busy, they didn’t have the time or ability to record who did what in real-time like they do today; it was done after the market closed — but that’s also when a lot of buying and selling. happened. So Hillary Clinton’s broker, who had tied to Tyson Food and was a cattle producer could engage in beneficial trading; folks like him were always buying and selling futures because they were directly in the market.
The National Review article (Clinton’s Cattle Futures) is important because it provides a very detailed explanation of Hillary’s transactions. Hillary Clinton really wasn’t buying cattle; she was getting payoffs through her broker and who was just throwing profits into her account.
Three important points can be gleaned from the information. First, Hillary told everyone that anyone could have profited from the type of trading she (supposedly) did. But she really didn’t do the trading; in fact, it’s quite obvious that she didn’t even understand what kind of transactions were taking place. Most of her deals were actually downward movements when the market in general was going up, but she didn’t know that. It’s called trading on the short side — and no rational, inexperienced trader would know to or understand the thought of trading against the market trends, yet she did on several occasions, quite lucratively. Even today, she talks about riding a strong market, showing she doesn’t obviously understand that much of her profits were made by doing the exact opposite.
The second important point was the margin. Especially today, but even back then, no professional broker would allow you to execute a trade and any penny of movement that would make you lose thousands or cause your balance to be severely in the negative. For their own sake, they’d make sure you had collateral your account, and you need to have decent margin in case the cattle price changed 4-5 cents (which would translate into thousands). But Hillary Clinton regularly made trades with risks in the thousands, even if she only had hundreds in her account — and even negative on occasion. Hillary and Bill also lived on meager salaries with very little (if any) collateral. The fact that she was allowed to trade with consistently little-to-no margin is actually a violation of trade rules because it also puts the trader at risk — there’s no way any regular customer could do that.
3) The third salient point is in regard to the trading activity. There were a series of trades that she bought within 10% of the lowest price of the day, and when she sold, she sold within 10% of the highest price of the day. As any serious trader knows, there is no way anyone could consistently do that — unless there was help. If the broker was waiting at the end of the day, he could put the buys at below price and sells at the high price, so that she always made money; it is quite plausible this was the case, due to the record keeping methods and the name misspelling (HILARY) substantiate this.
It’s quite annoying to read the National Review article and consider how it squares up with the people who investigated Hillary’s trades at one point and declared there was no problem. Given what we know now, do these experts still think they were correct, or do they know they were bamboozled along with the rest of us.
There’s no possibility Hillary is telling the truth in this matter.
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A must read, food-for-thought from National Review:
Herd Instincts
Is Hillary Clinton a better commodities trader than George Soros, or did she just get really, really lucky? Both explanations leave something to be desired.
By Caroline Baum & Victor Niederhoffer — June 1, 2016
Editor’s note: A version of this article originally appeared in the February 20, 1995, issue of National Review.
When Newt Gingrich told a Republican audience recently that his lucrative book deal paled in comparison with Hillary Clinton’s cattle-trading profits, the Speaker’s comments were greeted with wild applause and raucous laughter. Opened to public scrutiny less than a year ago, Mrs. Clinton’s one hundred-fold return from trading futures has already become part of popular lore. Whenever anyone is suspected of making a fast buck nowadays, the First Lady’s adventure in commodities trading is bound to come to mind.
On October 11, 1978, the future First Lady, a neophyte investor with an annual income of $25,000, opened a commodity-futures account with a deposit of $1,000. Her first trade was the short sale of ten live-cattle contracts at a price of 57.55 cents a pound: a commitment to deliver in December of that year 400,000 pounds of cattle with a market value of $230,200. One day later, she bought the contracts back at a price of 56.10 cents, just 0.15 cent above the low of the day, pocketing $5,300 for a return of 530 per cent.
Mrs. Clinton continued to be a net winner at the game. By the time she closed her trading account ten months later, she had racked up $99,541 in profits, a spectacular 10,000 per cent return on her initial investment of $1,000. Either Mrs. Clinton was a better trader than the legendary George Soros, whose best-ever annual return in thirty years of trading was 122 per cent, or she was led by an invisible hand.
During a press conference last April, the First Lady attributed her success to her advisor James Blair’s “theory that because of the economy in the early part of the 1970s, a lot of cattle herds had been liquidated, so that there was going to be a big opportunity to make money in the late Seventies.” After examining Mrs. Clinton’s trading records, Leo Melamed, the father of financial futures and former chairman of the Chicago Mercantile Exchange, and Jack Sandner, the Merc’s current chairman, found nothing irregular except, on occasion, insufficient margin in her account. Anyone could have done as well, these gentlemen said, given the doubling of cattle prices during her year of trading. Mr. Melamed called the brouhaha over the First Lady’s financial affairs “a tempest in a teapot.” Mr. Sandner attributed her success to her “trading the biggest bull market in the history of cattle. If someone caught that trend and traded it well, they could make an extraordinary amount of money, a lot more than $100,000, on a small investment.”
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Yet Mrs. Clinton bucked the trend and traded it well. Most of her trades, including her first two, her last two, and her single most profitable trade (in dollar terms) were initiated from the short side, anticipating a decline in cattle prices. Short selling by the public is extremely rare, especially on a first trade. When one considers that both the investor and her trading advisor were using a herd-reduction theory to capitalize on the biggest bull market in cattle in history, the success of her short sales raises a bright red flag.
In other situations where the legitimacy of a transaction is suspect, the courts are guided by the common-law doctrine, enunciated by Supreme Court Justice Antonin Scalia in the 1994 case BFP v. Resolution Trust Corporation, that “a transfer of title for a grossly inadequate (or in some cases grossly excessive) consideration would raise a rebuttable presumption of actual fraudulent intent.” Except for a press conference or two attended by sympathetic journalists not familiar with commodities trading, the First Lady has done nothing to rebut that presumption.
IN SEARCH OF SLIME
Cases of fraud are notoriously hard to prove. In the investigation of a suspected fraud, the prosecutor does not expect to uncover a document outlining the terms of an illicit financial transfer between two parties. Similarly, an insurance investigator does not expect to find an arsonist standing on the fire-ravaged premises with match and empty gasoline can in hand.
But the clues are there. Despite their best efforts, perpetrators of fraud usually leave a slimy trail — what fraud investigators refer to as badges or indicia. As the Tennessee Supreme Court put it in the 1835 case Floyd v. Goodwin, “Fraud has to be ferreted out by carefully following its marks and signs, for fraud will in most instances, though ever so artfully and secretly contrived, like the snail in its passage, leave its slime by which it may be traced.”
RELATED: Why Both Clintons Are Such Unapologetic Liars
Insurance investigators have an objective list of marks and signs that they look for when a presumption of fraud exists. In cases where arson is suspected, one of the first questions a fire investigator tries to answer is: Was the pet removed from the premises? Medical fraud might be indicated when the medical bills in question are photocopies, or if they fail to itemize office visits and treatments. In cases of automobile-accident fraud, one marker would be a claimant’s attempt to discourage an insurance investigator from looking at the damaged vehicle.
As far as we know, there are no indicia for commodities-trading fraud. So we took it upon ourselves to develop a checklist of fraud indicators that would apply to a broad range of financial trickery. We are confident that any investment activity that scores high on our test merits a red flag. We have rated the likely legitimacy of Mrs. Clinton’s activities on a scale ranging from 1 (highly likely) to 10 (highly unlikely) for each often criteria.
1. Were the returns excessive as measured against a normal yardstick of performance? Yes. As discussed above, Mrs. Clinton’s annual return was more than eighty times George Soros’s in his best year. As far as we know, no non-professional has ever achieved a return of that magnitude. Stanley Kroll, a well-known commodities broker who worked at three major firms at that time, has written that none of his retail customers turned a profit. Neither did those of any of his colleagues at other firms. Even Mrs. Clinton’s trading advisor, Jim Blair, who says he was “damn good” at making money in commodities, suffered a $15 million trading loss shortly after his pupil stopped trading. Score: 10 points.
2. Has there been any effort to suppress investigation of the transaction? Yes. Mrs. Clinton was adamantly opposed to the appointment of a special prosecutor to look into her and her husband’s financial dealings, including her own trading activities, during the late 1970s and 1980s. She attempted to deflect attention from the matter by explaining away her newfound wealth as a gift from her parents, until the Clintons’ 1978 and 1979 tax returns were made public and the actual source of her windfall profit was revealed. Furthermore, despite our repeated and friendly requests to both the First Lady’s and the White House’s press representatives, none of our questions concerning the elementary details of Mrs. Clinton’s trades and the availability of original documentation has been answered. Score: 10 points.
RELATED: All of Hillary’s Lies Are Premeditated
3. Are crucial records of the transaction missing or available only in duplicate form? Yes. The purchase and sale confirmations for Mrs. Clinton’s two most profitable trades are lost or missing. Her first, extraordinary transaction is also among the missing. The details were furnished by the Chicago Mercantile Exchange. Mrs. Clinton has no independent recollection of her first trade, which produced a 530 per cent return overnight. You can be sure that Fernando Valenzuela hasn’t forgotten the five shutouts in his first seven games as a rookie pitcher for the Los Angeles Dodgers in 1981. Score: 10 points.
4. Did the suspect alter his story regarding the activity in question? Yes. The White House furnished ever-changing versions of Mrs. Clinton’s trading activities. First, we were told she did her own research, relying primarily on the Wall Street Journal, and placed all of her own trades. Then mentor James Blair played an advisory role, but she made the decisions, determined the size, and placed all the trades. As it now stands, she relied on Blair’s advice, and he placed most of her trades. When queried, the First Lady said the confusion was the result of the way the story was communicated to the press. Score: 10 points.
5. Were a good portion of the purchases and sales executed near the most favorable prices of the day? Yes. As noted, Mrs. Clinton’s first trade of ten live-cattle contracts (sold short) was followed by a purchase at a price just 0.15 cent above the day’s low. The odds of a retail trader buying at a price 15 points off the intraday low on a ten-contract trade are about the same as those of finding the Dead Sea Scrolls on the steps of the State House in Little Rock.
Many of Mrs. Clinton’s subsequent transactions were executed near the day’s extremes, including her last big trade in July 1979. At a time when her account was $18,000 under water, she managed to sell fifty live-cattle contracts 0.12 cent from the high on a day when prices dropped by the 1.5-cent limit. Her very last trade was a purchase of fifty cattle contracts just 0.05 cent above the low of the day. Such precision trading would be enviable for a trader who spends every second of the trading day glued to the screen. It is a dazzling coup for a non-professional like Mrs. Clinton, who had many other claims on her time, such as litigating for the Rose Law Firm, serving on corporate boards, crusading for children’s rights, chairing the Legal Services Corporation, and performing various duties as the governor’s wife. Until Hillary’s diaries and Rose’s time sheets become public and reveal her whereabouts between the opening and closing of the cattle pit each day she traded, we cannot award her a perfect score. Score: 8 points.
RELATED: Habitual Liar Lies Habitually
6. Was there anything unusual about the suspect’s behavior or anything irregular about the activity in question? Yes. As mentioned earlier, Mrs. Clinton, a neophyte investor with nearly no savings, traded the biggest bull market in the history of cattle primarily from the short side. Her first three transactions were short sales. The irregularities connected with her first trade alone should have tripped the security system. The commission of $500 and bid-asked spread of around $600 on such a trade came to more than her entire initial equity of $1,000. So from the moment she entered her first transaction she had already lost more than she could afford to lose. Unlike that of most traders, Hillary’s trading activity rebought and sold everything from one and two lots to sixty contracts at a time. In her waning days as a speculator, she day-traded fifty contracts at a time when she already had an open position of 65 contracts. Score: 10+ points.
7. Was the risk in the trading program inconsistent with the customer’s net income and net worth? Yes. Mrs. Clinton’s 1978 earned income of $24,250 from the Rose Law Firm partnership and husband Bill’s $26,500 as Arkansas attorney general are considerably lower than the minimums set by most brokerage houses for opening a commodities-trading account. If for some reason Mrs. Clinton had lost rather than won $100,000, where would she have come up with the money?
On three separate occasions (in November 1978, December 1978, and July 1979), the value of Mrs. Clinton’s open positions was well in excess of $1 million for days at a time, and in two cases for up to three weeks. A 2 to 5 per cent move — the sort of move that occurs about once every two weeks — in the wrong direction would have wiped out not only the Clintons’ net income for the year but also their entire net worth. Their joint political aspirations would have gone up in smoke if the governor-elect had been forced to declare personal bankruptcy as a result of his wife’s speculations in commodities futures. Score: 10 points.
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8. Was the suspect in a position to do a favor for any of the other parties involved? Yes. Hillary’s advisor, James Blair, was not only a family friend, but also counsel of Tyson Foods, the largest chicken processor in the world and Arkansas’s biggest employer. According to a 1994 article in The New York Times Magazine, the company’s chairman, Don Tyson, viewed “politics as a series of unsentimental transactions between those who need votes and those who have money . . . a world where every quid has its quo.” Clearly Tyson had money, and he put it on Bill Clinton in 1978. In return, as reported in The New York Times Magazine, he expected the new governor to raise the legal truck-weight limit in Arkansas so that Tyson Foods could compete with out-of-state poultry truckers.
Blair may also have been balancing an item in his own account. In the early months of the Carter Administration, Bill Clinton coordinated federal patronage in Arkansas, and one of his first moves in this area was to recommend Blair for the chairmanship of the Federal Home Loan Bank Board.
In Keys to Crookdom, written in 1924, George C. Henderson comments: “The great grafter does not buy government officials after they are elected, as a rule. He owns them beforehand,” And, in a prescient conclusion: “Occasionally good and faithful servants are rewarded by attorneys’ fat fees, gifts and market tips in addition to emoluments of the office.” Score: 10 points.
9. Was there any history of illegal, irregular, or unethical behavior on the part of the broker? Yes. Red Bone, the broker of record for both Mr. Blair and Mrs. Clinton, was suspended from trading for a year, even before he left Tyson Foods to run the Refco brokerage office in Springdale, Arkansas, for trying to comer the egg futures market. In 1979, Red was disciplined by the Chicago Mercantile Exchange for “serious and repeated violations of record-keeping functions, order-entry procedures, margin requirements, and hedge procedures.” Refco was fined $250,000, at the time the largest fine ever levied for commodity-trading violations.
One of Refco’s Springdale brokers at the time has admitted under oath that the firm was buying and selling blocks of contracts and allocating them to customers after the market closed. In one instance, after being chastised by their superiors in Refco’s Chicago headquarters, the brokers had to set back the time-stamp clock before stamping the day’s trades to give the appearance that account allocations had been properly made. Score: 10 points.
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10. Were rules, regulations, and normal operating procedures violated? Yes. Mrs. Clinton insists that despite the advice she received from James Blair, she maintained a non-discretionary account. Any non-broker who places an order for a customer is, by definition, acting in a discretionary capacity and must file the appropriate documents. And in view of Mrs. Clinton’s busy schedule and the precision timing of many of her trades, it is likely that Mr. Blair placed the orders without consulting with her. Yet no discretionary forms were ever filed. Finally, it is inconceivable that a prudent broker would assume all of the risk exposure for a client who did not have the funds to support her positions without a third-party guarantee. Score: 10 points.
Hillary’s total score on our financial hanky-panky scale is 98 out of 100, catapulting her to the top of the class for potential commodities fraud. A detailed examination of her trades seemed in order. We started with records of each purchase and sale confirmation and all of the monthly statements that were provided by the White House. Next we looked at the high, low, open, and close on each of these days to see how her fills compared to what was available. Finally, we calculated the unrealized gains, required margin, available equity, and commitments outstanding for each day during Mrs. Clinton’s ten months of trading.
FAVORABLE TREATMENT?
Backed up by legions of data, we were prepared to rebut the First Lady’s contention that “there isn’t any evidence that anybody gave me any favorable treatment.” Our analysis of the data and other documents yielded these observations:
1. Mrs. Clinton’s account was under-margined by $50,000 to $80,000 during a one-month period beginning November 10, 1978. Again in July 1979, her margin requirements were approximately $100,000 for several days, when there was negative equity (minus $30,000) in the account. A normal rule of thumb for commodity traders is to maintain equity of at least five times the margin requirement. Mrs. Clinton routinely reversed this ratio, maintaining equity around one-fifth of her required margin.
2. Her total equity would have been wiped out on three occasions, taking into account the commissions due and the cost of exiting the trades. On July 17, the commissions and bid-asked spreads on newly opened positions, added to her existing deficit going into the day, could have totally wiped out the family’s net worth, even without any market move against her.
3. Her name was misspelled “Hilary” on all the official brokerage statements she produced, raising the question of whether the statements were ever mailed to the detail-oriented attorney.
4. Her first two monthly statements reveal identical misalignments and faulty keystrokes on certain letters, raising doubts as to their authenticity. It wouldn’t take a great stretch of the imagination to conclude that they were generated simultaneously in an effort to cover the slimy trail.
5. Withdrawals from her account consistently kept her equity below $15,000. After each big win, she withdrew the spoils. Finally, after making about $100,000 in four days in July 1979, she closed her account down. Such behavior is inconsistent with human nature, as observed any day in Las Vegas or Atlantic City, as well as with Mrs. Clinton’s insistence that she reinvested her profits.
6. Two-thirds of her trades showed a profit by the close of the day she entered them, and 80 per cent of her trades, on both the long and the short sides, were ultimately profitable, percentages that are rarely achieved by the most successful professionals.
7. Commissions and slippage of her trades totaled more than 37 times her initial equity.
8. Most of her 33 trades were for five or ten lots. But on three occasions Mrs. Clinton traded fifty or sixty contracts, positions that would normally require about $1 million in equity to support. Each of these trades was entered at extraordinarily favorable levels relative to the price range of the day and was highly profitable by day’s end. On two of the large trades the overnight profits pushed a negative equity into the black. Had Mrs. Clinton lost on any of the large trades, the implications for her “investment program” would have been dire.
9. For a two-week period in July 1979, the equity in her account swung from negative $31,000 to positive $62,000. Finally, after the purchase of fifty contracts just a gnat’s eyelash above the low of the day, the account was closed with a withdrawal of $60,000, bringing total withdrawals to more than $99,000. Mrs. Clinton was allowed to trade like a millionaire, in the process violating numerous rules and procedures that industry professionals have developed to prevent financial catastrophe to customer and brokerage house alike.
10. More egregious than any of these other red flags of commodity-trading fraud was the size of Mrs. Clinton’s commitments. From day one, the size of her positions was wildly out of line with the equity available to absorb loss. On November 13, 1978, with $13,000 in her account, she controlled a position of 62 contracts with an underlying market value of $1.9 million. On December 11, 1978, she had $6,000 in her account and a ninety-contract position valued at $2.3 million. And on her third to last day of trading, July 17, 1979, she had 115 contracts outstanding with a market value of $3.2 million. The equity in her account was a negative $18,000.
The fluctuations in the price of Hillary’s cattle commitments taken in 1978 and 1979 averaged 1 per cent a day from close to close and 2 per cent from high to low. On unusual days, once or twice a month, cattle prices fluctuate by 4 or 5 per cent. All commodity traders know that they must be sufficiently liquid to withstand such extreme swings and avoid financial ruin. One 4 or 5 per cent adverse fluctuation in Mrs. Clinton’s position would have constituted five times her annual income and five times her net worth. And this is just a one-day move. Commodities have a nasty habit of moving against you for several days in a row, right to the point where you are forced to liquidate. But whenever Mrs. Clinton was on the brink of ruin, she managed to pull a rabbit out of a hat.
The outlook was not bright for her in the middle of July 1979. The total equity in her account was a negative $31,245. She owed $65,000 in margin requirement. On July 17, she doubled up, selling fifty more contracts just 0.12 cent off the day’s high of 68.72, and covering it that same day for a profit of $10,400. At the time, her required margin was $115,000 and her total cash due to the broker was $135,000. Most speculators know that doubling up when one’s position is seriously under water is a one-way ticket to ruin. Only if she had held a confirmed, round-trip ticket would someone in Mrs. Clinton’s position have been willing to risk the farm in such a high-stakes game. Providentially, three days later, on her last day of trading, the whole situation was resolved. Cattle closed down the limit again, and Mrs. Clinton covered her short position down by just 0.05 cent above the limit. She ended her career as a speculator with a final flourish to rival her first trade.
After extensive research, we have satisfied ourselves that Mrs. Clinton was neither naive nor lucky nor particularly talented as a trader. Even individuals who have never visited a futures exchange or traded one futures contract will, upon examination of the evidence, be convinced that Mrs. Clinton’s representation of the events 15 years later is highly implausible.
After a concerted attempt to follow the path and uncover the truth, we are still left with one gnawing question. Hillary Clinton earned profits of $99,541. What happened to the other $459?
Editor’s Note: This article as originally printed and reprinted mistakenly said that James Blair declared bankruptcy. In fact it was his broker, Robert “Red” Bone, who declared bankruptcy.
— Caroline Baum is a financial columnist with Dow Jones Telerate. Victor Niederhoffer is a commodities speculator. The authors wish to thank Jay McKeage and Jon Normile for their assistance. This article originally appeared in the February 20, 1995, issue of National Review.
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Dear Speaker Ryan,
I write to you today to ask about why the Jones Act amendment proposed by Rep. Gary Palmer and the reasonable minimum wage exceptions were left out of the Puerto Rican assistance act (PROMESA). If the purpose of the fiscal rescue bill was to aid the Puerto Ricans suffering from a fledgling economy and corrupt government, these two items would have greatly helped the Puerto Rican people.
The Jones Act, as you know, requires that all cargo shipped between U.S. ports be carried by U.S.-built, U.S.-crewed, U.S.-owned ships. The J0nes Act puts an unnecessary burden on our U.S territories; exempting Puerto Rico from this provision would have provided a much-needed burst of commerce and lower the cost of living. As it is now, the Jones Act limits international competition for competition for imports and creates higher taxes on basic necessities such as energy and food. This recent article in the National Interest, which covers the history and impact of the Jones Act, is a must-read.
In a similar way, allowing Puerto Rico to be exempted from federal minimum wage requirements would give businesses a chance to compete without artificial wage impediments. How can it be acceptable to deny the Puerto Rican people this tool to help aid recovery, when it once allowed American Samoa to be exempted as a favor to Nancy Pelosi because of her constituent operations there? When the favor was discovered and the exemption rescinded, the damage to the American Samoa people had already been done; the amount of subsequent layoffs and hiring freezes prompted delays in phasing in the minimum wage requirements in 2010, 2012, and most recently in 2015. Why in the world would not then make a minimum wage exemption for the Puerto Rico in order to help spur more rapid job creation and economic growth?
This would be the right time for Congress to enact stand alone law exemption US territories for laws such as the Jones Act and federal minimum wage. In that way, our territories can not only manage to survive, but actually thrive.
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To the President of Brown University,
I read with interest your recent commitment to increasing diversity at Brown University spending $100 million over the next 5-7 years in order to hire 60 more faculty members is an immense undertaking.
You wrote, “Many of the efforts detailed in our plan are focused on faculty diversity through targeted strategies such as early identification programs, postdoctoral programs and cluster hiring. By hiring the best and the brightest from a full range of backgrounds, we’ll put Brown in a position to attract exceptional students and scholars into our applicant pools.”
This is truly fantastic. Thus, I would like to know just how many conservative and libertarian professors Brown has hired or plans to hire as part of this initiative?
You also enthusiastically and “explicitly rejected mandatory ‘diversity training’, and cite diversity as “a key element of our core mission of education and discovery” being “integral to our commitment to cultivating an intellectual environment in which a wide range of views are represented and all individuals are treated with respect.” Agreed! Without libertarian and conservative point of views, you unequivocally cannot have a full, diverse point of view for learning. You certainly cannot possibly have a wide range of views if you have twice as many Marxist-leaning professors as the rest!
Supporting the necessity for diversity in higher education as a means for open conversation, a free exchange of ideas, and mutual respect. Without belittling the need to increase representation from historically underrepresented groups, it would be rather flawed to only focus on genetic diversity, while completely ignoring the expansion of diversity in political and ideological thought.
I look forward to hearing about your diversity expansion will include those that are politically and intellectually underrepresented at such a prestigious institution of higher learning.
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My friend Fred Smith over at Competitive Enterprise Institute (CEI) wrote a nice piece on the subject of income inequality.
Smith discusses the common beliefs and untruths of the topic, reminding us that “to the extent that inequality is a problem, it is because people are kept from working, saving, and investing in ways that make the most sense for them by bad government policies.” I have reprinted his piece in its entirety below:
“Despite living at a time of unprecedented decreases in poverty around the world, we’re witnessing a seemingly unprecedented increase in worry about income inequality in wealthy countries like the United States. And, not surprisingly, capitalism and its practitioners are often said to be to blame. When the news media and the general public look to the nation’s business leaders for an explanation, however, the response is rarely inspiring.
Whether it’s Fortune profiling “7 Billionaires Worried about Income Inequality” or Chief Executive listening while “8 CEOs Weigh in on Income Inequality,” we hear a lot of platitudes about how income inequality is a divisive social problem that “has to be dealt with,” followed quickly by a mumbled caveat about how this vitally important challenge, of course, does not require drastic measures like capping CEO pay or anything that would impact the competitiveness of one’s own firm.
On the other hand, we do hear a few high-profile CEOs advising political leaders to deal with inequality concerns by doubling-down on existing anti-poverty programs. Morgan Stanley CEO James Gorman is pushing an increase in the minimum wage and Berkshire Hathaway’s Warren Buffett is recommending an expansion of the Earned Income Tax Credit (EITC). Unfortunately the fact that higher minimum wages actually result in fewer low-wage jobs gets only slightly more acknowledgement than the fact that the EITC fraud rate is one of the worst of any government program. More of that? No, thank you.
So what should the titans of Wall Street be saying about this terrible scourge of some Americans being richer than most other Americans? Let’s start with the basics:
First, inequality per se in a game of envy and class warfare. Any objective measure of poverty or deprivation deserves its own assessment and debate and, if appropriate, its own public policy response. No one ever went without food, shelter, clothing, education, or healthcare just because the Gini coefficient was higher than 0.57. As my colleagues Iain Murray and Ryan Young discuss in a new study “People, Not Ratios,” statistical measurements of inequality are no substitute for focusing on the quality of life of real people. Ryan Bourne and Christopher Snowdon of the UK’s Institute for Economic Affairs come to the same conclusion in their own study, also released this week.
Second, it’s better to lift the floor than lower the ceiling (and again, that’s doesn’t mean raising the minimum wage). The best way to help people earn a better living – let’s consider a revolutionary idea – is to get rid of the obstacles that block people from earning a better living. This means, among other things, repealing an array of labor rules and licensing restrictions, both at the federal and state level. And, as Bloomberg View’s Megan McArdle reminds us, we can’t fall into the trap of thinking “entrepreneurs” have to be unicorn-founding tech gurus. Anyone who finds a new way to make money (or an old way to make more money) can be an entrepreneur, even if they never give a TED talk or buy a mega-yacht.
Third, economic inequality, the measurement of which is itself the subject of contentious debate, rises and falls for a variety of reasons. Jim Pethokoukis of the American Enterprise Institute points out that the 1990s economic expansion, the years before the Great Recession and dotcom bust that we’re all supposed to be pining for, also saw a significant increase of inequality, while the mortgage meltdown gave us a decrease. Inequality rose and fell long before Thomas Piketty’s Capital in the Twenty-First Century made headlines for becoming the most unread book of 2014, and the self-righteousness pandering about it that followed hasn’t improved anyone’s quality of life (unless, of course, you’re an Ivy League graduate student looking for a research grant).
Fourth, prosperity is not automatic. For thousands of years, most of the human race was dirt poor, and then, a couple of hundred years ago, living standards began shooting up. First in Europe and the U.S., but then dramatically all over the world. We have a good idea why this amazing thing happened, and the economist Deirdre McCloskey gives the best explanation of it: liberty. A political and social system that allows everyone to seek their chosen goals according to their own merits with as few restrictions as possible has moved the world from perpetual poverty to widespread prosperity. Hard work, commerce, and thrift – what Deirdre calls the “bourgeois virtues” – will get you a happier, healthier, and more peaceful society every time. Whatever brilliant new plans for reordering the economy that the inequality activists come up with, we ignore this lesson as our peril.
So there you have it, my CEO friends. If your critics come at you with questions about what you or your company are doing about inequality, tell them you’re selling goods and services to willing customers. You’re not cheating or defrauding anyone. You follow the rules and pay your taxes – even when they finance less-than-effective government programs. To the extent that inequality is a problem, it is because people are kept from working, saving, and investing in ways that make the most sense for them by bad government policies. We have real problems and challenges in this country – inequality, on its own, is not one of them.”
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Congressman Dave Brat wrote a stunning Op-ed in the Richmond Times Dispatch (“Immigration is killing Americans’ job prospects“) in which he blames immigrants — both legal and illegal — for the current anemic economy. Rightly citing “meager job growth” and “stagnant wages” as symptoms, he then makes a crass and erroneous conclusion that the problem is immigration.
Immigration is not killing Americans’ job prospects — government policy is. We all know that. Why does Congressman Brat ignore the elephant in the room? Brat talks about statistics and “jobs availability” as if the economy was a zero-sum endeavor and there is a finite amount of jobs available to go around, from which outsiders are taking more than their fair share. That’s absurd.
The reality is that job creation and growth by businesses — signs of a healthy economy — have slowed to a crawl because of 1) excessive and onerous regulations unleashed in the last several years; 2) increased taxes, and the high corporate tax rate; 3) overreaching agencies such as the NLRB and EPA; 4) Obamacare; and so forth.
These are all aggressive, anti-business policies that small and large businesses have had to increasingly contend with in our country. They are the reasons why more businesses are closing than opening and investment has declined. Businesses can’t afford to stay in business, comply with government diktats, and create new jobs.
To go after legal and illegal immigration while simultaneously ignoring the government’s culpability is disingenuous at best and pandering at worst. With a diatribe that strenuously complains about “the presence and availability of immigrants — whether legal or illegal, permanent or temporary — in the job market,” Congressman Brat sounds like he may be setting us up for a Trump endorsement down the road; such a line of ridiculous thinking is more compatible with Trump’s “Make America Great Again” slogan than any rational, logical economist — which is what Brat purports to be.
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Let me be perfectly clear: I am no fan of Denny Hastert. He should suffer the consequences of his deplorable actions.
However, let me also be perfectly clear that I am equally horrified at the machinations of the justice system in this particular case. Unfortunately it is equally clear that those actions are now subject to prosecution even though the statute of limitations has long since passed for them.
As a result of his actions, someone he had issues with in the negotiated money with him. Hastert’s actions were only revealed when the government went about questioning how he handled large transactions of his own money. I have written numerous times about practice of structuring and the oftentimes suspicious and overreaching government search and seizures. Hastert was trying to hide what could be considered extortion money. His actual charges were related to his banking transactions, not for anything else, because the statute of limitations had run out.
However, you cannot in any way justify an 18 month jail sentence for money structuring. Everyone admitted that the reason he got such a lengthy penalty was because he couldn’t be charged in the other activities. But how is that justice? Is this what we’ve come to — that you can now actually penalize someone for something completely unrelated to the charge because of emotion or outdated law? That is not justice. That is a criminal system run amok.
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The Washington Free Beacon is following up on a Wall Street Journal article in April, which revealed a coordinated effort to silence dissent on the subject of climate change.
“The attorney general of the U.S. Virgin Islands is targeting dozens of conservative and libertarian organizations in a racketeering lawsuit against climate change skeptics that has been widely described as an effort to silence political opponents.
In a subpoena issued in March, the office of USVI attorney general Claude Walker demanded from Exxon Mobil copies of communications between the oil company and 90 different political and policy organizations “and any other organizations engaged in research or advocacy concerning Climate Change or policies.”
The subpoena was part of a national, coordinated legal campaign by state attorneys general and left-wing advocacy groups to use the legal system against companies and organizations that disagree with and advocate against Democratic policies to address global climate change.”
The organizations suspected of “collusion” with Exxon are considered to be both libertarian and conservative in politics. Some of the big names are: the Cato Institute, the Competitive Enterprise Institute, The Federalist Society, the Heritage Foundation, the Hoover Institute, the Mercatus Institute, and the Reason Foundation.
The subpoena for communication is “part of a coordinated effort by Democratic attorneys general spearheaded by New York’s Eric Schneiderman and undertaken in consultation and cooperation with leading environmental advocacy groups.
The participants huddled at a Jan. 8 meeting at the headquarters of the Rockefeller Family Fund, a left-wing foundation.
At the meeting, RFF, Greenpeace, other environmental groups discussed ways to “delegitimize [ExxonMobil] as a political actor,” “force officials to disassociate themselves from Exxon,” and “drive divestment from Exxon,” according to a copy of the meeting agenda obtained by the Washington Free Beacon last month.
One strategy that activists discussed was to enlist like-minded state attorneys general to use their powers to go after the oil company.
Emails subsequently obtained by the Energy and Environment Legal Institute show that staffers at groups involved in the effort then briefed aides to those AGs. They discussed using “climate change litigation” to advance their political goals.”
This political stunt is absolutely ridiculous and legally uncertain. It’s worth keeping an eye on in the coming months as climate change is certain to be a factor in the November elections.
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Yesterday, The Treasury Department made more changes to rules with regard to inversions. The driving force behind the constant meddling into this legal practice is the retention of tax revenue.
“Under the new rules, there will be a three-year limit on foreign companies bulking up on U.S. assets to avoid ownership requirements for a later inversions deal, Treasury said in a statement.”
In an inversion, a U.S. company typically buys a smaller foreign rival and reincorporates to the rival’s home country, which moves the company’s tax domicile, though core management usually stays in the United States.
The Treasury, which had last introduced new rules in November to curb inversions, also is proposing tackling the practice of post-inversion earnings stripping with new limits on related-party debt for U.S. subsidiaries.”
This continued attack on inversions is ridiculous and companies are being targeted unfairly because they represent a possible loss of revenue for the government. Inversions are legal, and sometimes necessary. They are a way for U.S. companies to change their HQ from the U.S. to a foreign country, for the sole purpose of allowing themselves the express privilege of being on par with foreign companies and eliminate the severe disadvantage that the U.S. puts on its own businesses via excessive taxes!
It is outrageous that the government applies such discrimination. It is outrageous that American companies have to chose to move their headquarters elsewhere simply to survive and compete globally, because they are taxed on their profits in two jurisdictions — both domestic and foreign.
