Tidbits Quotations on July 8, 2010
To Accompany the July 8, 2010 edition of Tidbits
Bob Jensen at Trinity University


Video on IOUSA Bipartisan Solutions to Saving the USA

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

One take home from the CNN show was that over 60% of the booked National Debt increases are funded off shore (largely in Asia and the Middle East).
This going to greatly constrain the global influence and economic choices of the United States.

By 2016 the interest payments on the National Debt will be the biggest single item in the Federal Budget, more than national defense or social security. And an enormous portion of this interest cash flow will be flowing to foreign nations that may begin to put all sorts of strings on their decisions  to roll over funding our National Debt.

The unbooked entitlement obligations that are not part of the National Debt are over $60 trillion and exploding exponentially. The Medicare D entitlements to retirees like me added over $8 trillion of entitlements under the Bush Presidency.

Most of the problems are solvable except for the Number 1 entitlements problem --- Medicare.
Drastic measures must be taken to keep Medicare sustainable.


I thought the show was pretty balanced from a bipartisan standpoint and from the standpoint of possible solutions.

Many of the possible “solutions” are really too small to really make a dent in the problem. For example, medical costs can be reduced by one of my favorite solutions of limiting (like they do in Texas) punitive damage recoveries in malpractice lawsuits. However, the cost savings are a mere drop in the bucket. Another drop in the bucket will be the achievable increased savings from decreasing medical and disability-claim frauds. These are important solutions, but they are not solutions that will save the USA.

The big possible solutions to save the USA are as follows (you and I won’t particularly like these solutions):



Watch for the other possible solutions in the 30-minute summary video ---
(Scroll Down a bit)


Here is the original (and somewhat dated video that does not delve into solutions very much)
IOUSA (the most frightening movie in American history) ---
(see a 30-minute version of the documentary at www.iousathemovie.com )

If you missed Sunday afternoon CNN’s two-hour IOUSA Solutions broadcast, you can watch a 30-minute version at
http://www.pgpf.org/newsroom/press/IOUSA-Solutions-Premiers-on-CNN/   (Scroll Down a bit)
Note that great efforts were made to keep this a bipartisan panel along with the occasional video clips of President Obama discussing the debt crisis. The problem is a build up over spending for most of our nation’s history, It landed at the feet of President Obama, but he’s certainly not the cause nor is his the recent expansion of health care coverage the real cause.

Watch the World Premiere of I.O.U.S.A.: Solutions on CNN
Saturday, April 10, 1:00-3:00 p.m. EST or Sunday, April 11, 3:00-5:00 p.m. EST

Featured Panelists Include:

  • Peter G. Peterson, Founder and Chairman, Peter G. Peterson Foundation
  • David Walker, President & CEO, Peter G. Peterson Foundation
  • Sen. Bill Bradley
  • Maya MacGuineas, President of the Committee for a Responsible Federal Budget
  • Amy Holmes, political contributor for CNN
  • Joe Johns, CNN Congressional Correspondent
  • Diane Lim Rodgers, Chief Economist, Concord Coalition
  • Jeanne Sahadi, senior writer and columnist for CNNMoney.com

Watch for the other possible solutions in the 30-minute summary video ---
(Scroll Down a bit)


CBS Sixty minutes has a great video on the enormous cost of keeping dying people artificially alive:
High Cost of Dying --- http://www.cbsnews.com/video/watch/?id=5737437n&tag=mncol;lst;3
(wait for the commercials to play out)

U.S. Debt/Deficit Clock --- http://www.usdebtclock.org/

"The Looming Entitlement Fiscal Burden," by Gary Becker, The Becker-Posner Blog, April 11, 2010 ---

"The Entitlement Quandary," by Richard Posner, The Becker-Posner Blog, April 11, 2010 ---

David Walker --- http://en.wikipedia.org/wiki/David_M._Walker_(U.S._Comptroller_General)

Niall Ferguson --- http://en.wikipedia.org/wiki/Niall_Ferguson

Call it the fatal arithmetic of imperial decline. Without radical fiscal reform, it could apply to America next.
Niall Ferguson, "An Empire at Risk:  How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1
Please note that this is NBC’s liberal Newsweek Magazine and not Fox News or The Wall Street Journal.

. . .

In other words, there is no end in sight to the borrowing binge. Unless entitlements are cut or taxes are raised, there will never be another balanced budget. Let's assume I live another 30 years and follow my grandfathers to the grave at about 75. By 2039, when I shuffle off this mortal coil, the federal debt held by the public will have reached 91 percent of GDP, according to the CBO's extended baseline projections. Nothing to worry about, retort -deficit-loving economists like Paul Krugman.

. . .

Another way of doing this kind of exercise is to calculate the net present value of the unfunded liabilities of the Social Security and Medicare systems. One recent estimate puts them at about $104 trillion, 10 times the stated federal debt.

Continued in article --- http://www.newsweek.com/id/224694/page/1


Niall Ferguson is the Laurence A. Tisch professor of history at Harvard University and the author of The Ascent of Money. In late 2009 he puts forth an unbooked discounted present value liability of $104 trillion for Social Security plus Medicare. In late 2008, the former Chief Accountant of the United States Government, placed this estimate at$43 trillion. We can hardly attribute the $104-$43=$61 trillion difference to President Obama's first year in office. We must accordingly attribute the $61 trillion to margin of error and most economists would probably put a present value of unbooked (off-balance-sheet) present value of Social Security and Medicare debt to be somewhere between $43 trillion and $107 trillion To this we must add other unbooked present value of entitlement debt estimates which range from $13 trillion to $40 trillion. If Obamacare passes it will add untold trillions to trillions more because our legislators are not looking at entitlements beyond 2019.


The Meaning of "Unbooked" versus "Booked" National Debt
By "unbooked" we mean that the debt is not included in the current "booked" National Debt of $12 trillion. The booked debt is debt of the United States for which interest is now being paid daily at slightly under a million dollars a minute. Cash must be raised daily for interest payments. Cash is raised from taxes, borrowing, and/or (shudder) the current Fed approach to simply printing money. Interest is not yet being paid on the unbooked debt for which retirement and medical bills have not yet arrived in Washington DC for payment. The unbooked debt is by far the most frightening because our leaders keep adding to this debt without realizing how it may bring down the entire American Dream to say nothing of reducing the U.S. Military to almost nothing.

Niall Ferguson,
"An Empire at Risk:  How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1

This matters more for a superpower than for a small Atlantic island for one very simple reason. As interest payments eat into the budget, something has to give—and that something is nearly always defense expenditure. According to the CBO, a significant decline in the relative share of national security in the federal budget is already baked into the cake. On the Pentagon's present plan, defense spending is set to fall from above 4 percent now to 3.2 percent of GDP in 2015 and to 2.6 percent of GDP by 2028.

Over the longer run, to my own estimated departure date of 2039, spending on health care rises from 16 percent to 33 percent of GDP (some of the money presumably is going to keep me from expiring even sooner). But spending on everything other than health, Social Security, and interest payments drops from 12 percent to 8.4 percent.

This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force. Which is why voters are right to worry about America's debt crisis. According to a recent Rasmussen report, 42 percent of Americans now say that cutting the deficit in half by the end of the president's first term should be the administration's most important task—significantly more than the 24 percent who see health-care reform as the No. 1 priority. But cutting the deficit in half is simply not enough. If the United States doesn't come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power.

Blessed are the young, for they shall inherit the national debt.
Herbert Hoover --- http://www.brainyquote.com/quotes/quotes/h/herberthoo110353.html

Oh, and don't forget Fannie Mae and Freddie Mac, those two government-sponsored mortgage giants that engineered the 2008 subprime mortgage fiasco and are now on the public dole. The Fed kept them afloat by buying over a trillion dollars of their paper. Now, part of the Treasury's borrowing from the public covers their continuing large losses.
George Melloan, "Hard Knocks From Easy Money:  The Federal Reserve is feeding big government and harming middle-class savers," The Wall Street Journal, July 6, 2010 --- http://online.wsj.com/article/SB10001424052748704103904575337282033232118.html?mod=djemEditorialPage_t

"Hard Knocks From Easy Money:  The Federal Reserve is feeding big government and harming middle-class savers," by George Melloan, The Wall Street Journal, July 6, 2010 --- http://online.wsj.com/article/SB10001424052748704103904575337282033232118.html?mod=djemEditorialPage_t

A Federal Reserve fully attuned to the easy money demands of the Democrats and megabanks clearly has no plan to lift interest rates from their near-zero level. The rationale is: "Why should we? The Consumer Price Index (CPI) is rising at a modest 2% annual rate. Banks are getting healthier. Why risk stalling an economic recovery and sending a nervous stock market into a spin if things are going well?"

There are several answers to this rationale. Aside from the growing doubts among serious economists that the CPI is an accurate measure of inflation, let's examine the assumption that the Fed is financing an economic recovery. In fact, it is mostly financing a massive expansion of a federal government that's borrowing an unprecedented $1.5 trillion annually. Easy money keeps the government's interest cost on this pile of IOUs low. The recovery comes second, and last week's dismal job growth indicated that it is increasingly feeble.

Super-low interest rates also ensure that the big banks, fated to be wards of the government if the new financial reform becomes law, will have generous margins between their borrowing costs and lending revenues. This will enable them to further pad their balance sheets and correct the mistakes of yesteryear.

Oh, and don't forget Fannie Mae and Freddie Mac, those two government-sponsored mortgage giants that engineered the 2008 subprime mortgage fiasco and are now on the public dole. The Fed kept them afloat by buying over a trillion dollars of their paper. Now, part of the Treasury's borrowing from the public covers their continuing large losses.

There's a flip side, however. It only takes simple math to know that when interest rates are kept low, so are returns on savings and investment. To some critics of the Fed and the current Congress and administration, the easy money policy looks like a way to reward the imprudent (reckless bankers and borrowers and spendthrift politicians) at the expense of the prudent (honest earners, savers and investors.) Judging from opinion polls, that perception may go far to explain the mounting disgust among American voters over what goes on in Washington.

One of the most articulate critics has been Jeremy Grantham, chief executive of GMO, a Boston-based asset management company. In a recent speech he complained that under the Fed's near-zero interest rate policy, low returns on savings are forcing retirees to take greater risks to try to gain a better income.

Mr. Grantham wrote in his latest quarterly newsletter, issued during the spring market rally, that Fed Chairman Ben "Bernanke is begging us to speculate, and is being mean only to conservative investors like pensioners, who cannot make a penny on their cash. Collectively, we forego hundreds of billions of potential interest, but at least we can feel noble because we are helping to restore the financial health of the banks and bankers, who under these conditions could not fail to make a fortune even if brain dead."

The difficulty of making a penny with conventional investments is a particularly huge problem for managers of big pension funds representing millions of workers. Pension funds have traditionally allotted a small part of their portfolios to venture capital investments but kept the bulk in "safe" investments, including bonds maturing to match future payouts. But after the debacle with Fannie and Freddie mortgage-backed securities rated Triple A, "safe" no longer has the same meaning it had four years ago.

A survey by consultants Watson Wyatt estimates that institutional pension funds globally lost 19% of their asset worth in 2008, dropping their holdings to about $20 trillion from $25 trillion. Because of their losses and the pressures they face to meet future benefit obligations, many public funds are risking more money in so-called "alternative" investments. The alternatives include hedge funds. An article on the website Hedgeweek recently predicted that the percentage of public pension funds allocated to hedge funds will grow to 20% from 3% over the next decade.

A June 20 headline in the St. Petersburg Times reads: "Florida rolls the dice with a chunk of pension funds." It described how managers of the state's $113.8 billion public pension fund want to make more unconventional investments in an effort to attain the 7.75% return on investment needed to meet its future commitments.

The Florida managers have plenty of company. New Jersey's $68 billion fund has $9.9 billion in alternative investments, including $3 billion in hedge funds, as it seeks to make up a huge shortfall, according to Bloomberg News. California's huge Calpers public employee fund has had a hedge fund adjunct for some time and is currently struggling to get a better performance out of it.

But Washington has rigged the game to favor government borrowing and the big banks. Congress is of course aware of its political vulnerability when pension funds are in trouble. But its answer is selective bailouts, not a change in the low-interest-rate policies that aggravate the problem. Bailouts of course only add to the already swollen federal deficit.

States suffer in another way as their budgets, with few exceptions, bleed red ink. Many states, Connecticut and New York in particular, have highly progressive tax structures and depend heavily on wealthy taxpayers for revenues. But the wealthy, too, have trouble making money on traditional investments. Indeed, the World Wealth Report recently released by Merrill Lynch and Capgemini reports that millionaires also have become wary of conventional investment, in part because of their uncertainty about future Washington policies. They are showing a preference for real assets, like gold or jet planes. Assets of that kind make a good inflation hedge, which no doubt accounts for the choice, but they don't usually yield much taxable income.

Interestingly, the relative decline in conventional investment returns closely parallels the Fed's near decade of easy money policy. According to the federal Bureau of Economic Analysis, the percentage of personal income accounted for by interest and dividends, currently declining, has been doing so throughout this decade. In 2000, interest and dividends accounted for 17.2% of personal income. In April, the percentage was 14.5%. Interestingly, transfer payments like Social Security and welfare rose to 18.2% from 12.8%.

There are plenty of winners when monetary policy feeds the growth of the government leviathan. But there are losers too, especially the millions of prudent savers and investors.

Mr. Melloan, a former columnist and deputy editor of the Journal editorial page, is author of "The Great Money Binge: Spending Our Way to Socialism" (Simon & Schuster, 2009).

"The Financial Reform Law: A 'Fig Leaf' It won't prevent bad bets by banks, and hence won't prevent the next financial crisis, say the experts," by Christine Harper and Bradley Keoun, Business Week, July 1, 2010 ---

The financial reform bill will change the way banks do business in everything from credit cards to credit default swaps. What it won't do is fundamentally reshape Wall Street, and it doesn't seem likely to prevent bad bets by bankers from causing another crisis. The legislation is "largely a fig leaf," says Dean Baker, co-director of the Center for Economic & Policy Research in Washington. "Given where we were when this got started, I'd have to imagine the Wall Street firms are pretty happy."

The overhaul allows banks to remain in the profitable derivatives business and won't shrink those deemed "too big to fail," leaving largely intact a U.S. financial industry dominated by six companies with a combined $9.4 trillion of assets. The changes also do little to address the danger posed by banks relying on the fickle credit markets for funding that can evaporate in a panic, like the one that spread in late 2008.

A deal reached by members of a House and Senate conference just after dawn on June 25 diluted provisions from the tougher Senate bill, limiting rather than prohibiting the ability of banks to trade derivatives and invest in hedge funds or private equity funds. Senator Scott Brown (R-Mass.) made his support conditional on a loosening of restrictions on hedge fund and private equity fund ownership by banks. Brown won another concession when he demanded that the committee remove a $19 billion fee on banks and hedge funds that had been tacked on at the last minute. The June 28 death of Senator Robert C. Byrd (D-W. Va.), who supported the bill, means a final vote won't take place until mid-July.

Senator Blanche Lincoln (D-Ark.) had originally advocated forbidding banks from trading swaps if they receive federal support such as deposit insurance. That could have forced banks to spin off those businesses. In the final legislation, bank holding companies such as JPMorgan Chase (JPM) and Citigroup (C) will be required to move less than 10 percent of the derivatives in their deposit-taking banks to a broker-dealer division over the next two years. Goldman Sachs (GS) and Morgan Stanley (MS), the two biggest U.S. securities firms before they converted into banks in 2008, have smaller deposit-taking units and already hold most of their derivatives in their broker-dealer arms. The derivatives rules are "nowhere near as bad as what the banks might have feared," William T. Winters, former co-chief executive officer of JPMorgan's investment bank, told Bloomberg Television on June 25.

Another portion of the legislation that was amended in the final conference was the so-called Volcker rule, named for Paul A. Volcker, the former Federal Reserve chairman who championed it. Originally the rule would have prevented any systemically important bank holding company from engaging in proprietary trading, or betting with its own money, as well as investing its own capital in hedge funds or private equity funds.

In the final version, the banks will be allowed to provide no more than 3 percent of a fund's equity and will be limited to investing up to 3 percent of their Tier 1 capital—which includes common stock, retained earnings, and some preferred stock—in hedge funds or private equity funds. That represents a ceiling of about $3.9 billion for JPMorgan, $3.6 billion for Citigroup, and $2.1 billion for Goldman Sachs, according to the companies' latest quarterly reports.

Further diluting its impact, the Volcker rule doesn't take effect for 15 to 24 months after the law is passed. Then the banks have two years to comply, with the potential for three one-year extensions after that. They could seek five more years to withdraw money from funds that invest in "il- liquid" assets such as private equity and real estate, says Lawrence D. Kaplan, an attorney at Paul, Hastings, Janofsky & Walker in Washington. "I don't think it will have any impact at all on most banks," Winters said of the amended Volcker rule.

Some provisions of the new law may require banks to raise more capital as a buffer against setbacks. But they will still be able to borrow heavily in the short-term credit markets to fund their operations, rather than rely on deposits, which are more stable. Their dependence on market-based funding made firms like Goldman Sachs and Morgan Stanley vulnerable to the panic of 2008. "Something has to be put in place to cause banks to have deposit-based liabilities and not market-based liabilities," says Benjamin B. Wallace, a securities analyst at money manager Grimes & Co.

The legislation will make the financial system safer, says James Ellman, president of Seacliff Capital, a hedge fund that specializes in financial industry stocks. Even so, he says, "It won't satisfy anybody who wanted really strict additional regulation of banks."

The bottom line: The financial reform bill imposes a raft of new rules, but critics say it does not go to the heart of the problems that created the crisis.

Bob Jensen's threads on the current financial crisis and its aftermath ---

"Entrepreneurship Helps Make America Great," by John Stossel, Townhall, June 2010 ---

For all its problems, America is a great place. And one thing that makes America great is its prosperity. Yes, some people have suffered during the recession -- but compared to all the other countries in the history of the world, America is rich. Why?

One reason is that America is a good place to do business.

Dinesh D'Souza, author of "What's So Great about America," points out: "In most other societies, the businessman has been looked down upon. He's been seen as a kind of sleazy guy. But then American founders specifically put protection for patents and trademarks in the Constitution.

And suddenly, the entrepreneur is taken from the bottom of the heap and brought to the front."

Today, Asian students crush Americans on standardized tests, but it's Americans who invent things like the transistor and the integrated circuit and go on to win disproportionate numbers of Nobel Prizes. Our culture of entrepreneurship turns that science into wealth.

TV pitchman Anthony Sullivan is from Britain, but he says his business didn't thrive there.

"I found in England if there's 10 reasons you could do something, there's 20 reasons why you couldn't do it, you shouldn't do it, " says Sullivan. "I found in the States that people will give you a shot."

One sign of this attitude is that it's relatively easy to start a business here. I opened one in Wilmington, Del. I named it the Stossel Store. It was just a table from which I pitched my "Give Me a Break" book and Fox merchandise. I picked Wilmington because our research showed that Delaware and Nevada make opening a business easier than other states. It still took me a week to get legal permission, but it would have taken much longer in Europe.

"I have started businesses in the U.K. and India. It takes at least a month or more just to open doors," A.J. Khubani, president of TeleBrands, says.

Unfortunately, bureaucrats are threatening this good part of America. I had to register with the Delaware Secretary of State and the Division of Corporations, get a federal employer identification number, buy commercial liability insurance, register with the Delaware state Department of Finance, etc.

I didn't even try to open a business in my hometown, New York City, because the bureaucracy is so ferocious. The fastest-growing cities of the world make it easier. In Hong Kong several years ago, I got a business permit in just one day. It's a reason Hong Kong is rich. Entrepreneurs are encouraged.

But at least America is a close second.

America also has a different idea about failure. The Stossel Store was a bad idea. I lost money. D'Souza says that in other places, that would be evidence that I am a complete failure. I tried to make a profit, failed and so shouldn't try again.

That's the attitude in most of the world, says D'Souza.

"You say: 'You know what? I tried my hand at business. It didn't work. Now, let me take a salary job where I'll have some security."

He says that's not true in America.

"An American will start a company. It'll fail. Pretty soon, he's starting a newspaper, or he's now trying to export fish to Japan."

We know that Thomas Edison invented the light bulb, but Edison failed much more often than he succeeded. He had hundreds of failures. He was fired by the telegraph office, and lost money on a cement company and an iron business. Henry Ford's first company failed completely. Dr. Seuss' first book was rejected by 27 publishers. Oprah was fired from her first job as a reporter. A TV station called her unfit for television.

"There's something in the American temperament that says, 'Gosh, I lost seven times but that's OK,'" D'Souza says. "And I think that that's a resiliency of the American spirit."

It's one of several great things about America.


"A (Better) Reason to Hate BP:  Did the oil giant profit from the Lockerbie bomber's release?" The Wall Street Journal, July 6, 2010 ---

What Barack Obama taketh away, Moammar Gadhafi giveth. That must be the fond hope these days at BP, as it seeks to recoup in Libya's Gulf of Sidra what it is losing in the Gulf of Mexico. And if it takes a wretched lobbying effort to make that happen, so be it.

Yesterday, the chairman of Libya's National Oil Co. told Zawya Dow Jones that he would urge Libya's sovereign wealth fund to buy a strategic stake in the troubled oil giant. That follows news that Libya will allow BP to begin deepwater drilling next month off Libya's coast as part of a $900 million exploration deal initially agreed upon in 2007.

BP is no less enthusiastic, noting in a 2007 press release that the deal represented "BP's single biggest exploration commitment," equivalent to "2000 Gulf of Mexico deepwater blocks." Long term, some predict BP could reap $20 billion from the deal, perhaps enough to cover its Gulf of Mexico claims fund.

This rare patch of sunshine for BP arrives almost simultaneously with reports of another sort. Over the weekend, London's Sunday Times reported that a doctor who last year diagnosed Lockerbie bomber Abdel Baset al-Megrahi with metastatic prostate cancer and gave him three months to live now thinks the former Libyan intelligence agent "could survive for 10 years or more."

Karol Sikora, the dean of medicine at Buckingham University who was paid by the Libyan government for his prognosis, says he finds it "embarrassing" that Megrahi is very much alive and kicking in Libya after he was released last August from a Scottish prison on grounds that he only had a few weeks to live. "It was clear that three months was what they [the Libyans] were aiming for," he said. "I felt I could sort of justify [that]."

Megrahi's not-so-surprising longevity is the latest sordid twist in a tale in which BP is no bystander. It begins in 2004, with efforts by then-British Prime Minister Tony Blair to rehabilitate Col. Gadhafi and open Libya to British commercial interests. BP inked its exploration deal with Libya following a second visit by Mr. Blair in 2007. But the deal nearly ran aground after the U.K. took its time finalizing a prisoner transfer agreement between the two countries.

It was at this point that BP became concerned. As this newspaper reported last September, BP admits that in 2007 it "told the U.K. government . . . it was concerned that a delay in concluding a prisoner transfer agrement with the Libyan government might hurt" the deal it had just signed. BP also told the Journal that a special adviser to the company named Mark Allen, formerly of MI6 and well-connected in Labour Party circles, raised the transfer agreement issue with then-Justice Secretary Jack Straw, though the company also says the two did not discuss Megrahi.

On what basis (other than sheer mercantilism) would a BP adviser raise a prisoner transfer agreement with senior U.K. officials? I put that question to a BP spokesperson and was told I'd hear back "shortly." As of press time, I still hadn't.

As for the U.K. and Scottish governments, their denials that Megrahi's release had anything to do with BP and other oil interests could not be more emphatic. "The idea that the British government and the Libyan government would sit down and somehow barter over the freedom or the life of this Libyan prisoner and make it form some part of some business deal . . . it's not only wrong, it's completely implausible and actually quite offensive," said then-U.K. Business Secretary Peter Mandelson at the time of Megrahi's release.

Yet as the Sunday Times reported last year, in 2007 Mr. Straw wrote his Scottish counterpart Kenny MacAskill, the man who ultimately decided on Megrahi's release, that the U.K. would not exclude the Libyan from the prisoner agreement. "The wider negotiations with the Libyans are reaching a critical stage," Mr. Straw wrote, "and in view of the overwhelming interests for the United Kingdom, I have agreed in this instance the [prisoner agreement] should be in the standard form and not mention any individual."

Weeks later, Libya formally ratified its deal with BP, though it was again subject to bureaucratic delays until Megrahi's release. BP denied last year that the delays were anything other than routine. But the Libyans have been less than coy about the linkage: "People should not get angry because we were talking about commerce or oil," Gadhafi's son Seif said after Megrahi's release.

BP has now spent the past 11 weeks promising to make things right for everyone affected by the Gulf spill. But for the families of Pan Am Flight 103's 270 victims, things can never be made right. Nor, following Megrahi's release, will justice ever be served. The question that BP could usefully answer—and answer fully—is whether, in that denial of justice, their interests were served. It won't restore the company to honor, but it might do something to restore a measure of trust.


"Jonah Goldberg Byrd Tributes Go Overboard," by Jonah Goldberg, Townhall, July 2010 ---

It is a good rule of thumb not to speak ill of the dead. But what to do when a man is celebrated beyond the limits of decorum or common sense? Must we stay silent as others celebrate the beauty and splendor of the emperor's invisible clothes?

You probably know why I ask the question. Robert Byrd, the longest-serving member of the Senate in American history, died Monday. It was truly a remarkable career. But what's more remarkable is how he has been lionized by the champions of liberalism.

On Thursday, Byrd's colleagues took the unusual step of honoring him with a special service on the Senate floor, where he would lay in repose -- with some irony -- on the Lincoln Catafalque, the bier used to hold the slain body of the president who freed the slaves. The irony stems from the fact that for much of Byrd's life, his allegiances were with Lincoln's opponents in that effort. More on that in a moment.

Not long ago, the assembled forces of liberalism were convinced that the Senate was "broken," that the anachronistic filibuster impeded progress. The Senate itself, with its arcane rules and procedures, had become undemocratic and was in need of vital reform, according to all of the usual voices. John Podesta, president of the Center for American Progress and a sort of archbishop of liberalism these days, drew on his deep command of political theory and social science to explain that the American political system "sucks," in significant part due to the unwieldiness of the Senate.

Well, who better represented those alleged structural problems than Byrd? Nearly every obituary celebrates his "mastery" of the rules. This is from the first paragraph of the Washington Post's obituary: Byrd "used his masterful knowledge of the institution to shape the federal budget, protect the procedural rules of the Senate and, above all else, tend to the interests of his state."

Yes, what about his tending to his state's interests? For several years there's been a lot of bipartisan indignation over the perfidy of pork and "earmarks."

Who, pray tell, better represented that practice than Byrd? The man emptied Washington of money and resources with an alacrity and determination not seen since the evacuation of Dunkirk. There are too many of these Byrd droppings in West Virginia to count, but we do know there are at least 30 buildings and other structures in that state named for him. So much for Democrats getting the message that Americans are sick of self-aggrandizing politicians.

And so much for the idea that Washington has become calcified by a permanent political class. Better to celebrate the fact that he cast his 18,000th vote in 2007.

And then, of course, there is the issue of race. The common interpretation is that Byrd's is a story of redemption. A one-time Exalted Cyclops of the KKK, Byrd recruited some 150 members to the chapter he led -- that's led, not "joined," by the way. (If you doubt his commitment to the cause, try to recruit 150 people to do anything, never mind have them pay a hefty fee up front.)

Byrd filibustered the 1964 Civil Rights Act. As Bruce Bartlett notes in his book "Wrong on Race," Byrd knew he would fail, but he stood on bedrock principle that integration was evil. His individual filibuster, the second longest in American history, fills 86 pages of fine print in the Congressional Record. "Only a true believer," writes Bartlett, "would ever undertake such a futile effort."

Unlike some segregationists, Byrd's arguments rested less on the principle of states' rights than on his conviction that black people were simply biologically inferior.

Sure, he lied for years about his repudiation of the Klan. Sure, he was still referring to "white niggers" as recently as 2001. But everyone agrees his change of heart is sincere. And for all I know it was.

What's odd is what passes for proof of his sincerity. Yes, he voted to make Martin Luther King Day a holiday. But to listen to some eulogizers, the real proof came in the fact that he supported ever more lavish government programs -- and opposed the Iraq war. Am I alone in taking offense at the idea that supporting big government and opposing the Iraq war somehow count as proof of racial enlightenment?

Robert Byrd was a complicated man, but the explanation for the outsized celebration of his career strikes me as far more simple. He was a powerful man who abandoned his bigoted principles in order to keep power. And his party loved him for it.

Continued in article

"The Massachusetts Health-Care 'Train Wreck':  The future of ObamaCare is unfolding here: runaway spending, price controls, even limits on care and medical licensing," by Joseph Rago, The Wall Street Journal, July 7, 2010 ---
http://online.wsj.com/article/SB10001424052748704324304575306861120760580.html?mod=djemEditorialPage_t .

President Obama said earlier this year that the health-care bill that Congress passed three months ago is "essentially identical" to the Massachusetts universal coverage plan that then-Gov. Mitt Romney signed into law in 2006. No one but Mr. Romney disagrees.

As events are now unfolding, the Massachusetts plan couldn't be a more damning indictment of ObamaCare. The state's universal health-care prototype is growing more dysfunctional by the day, which is the inevitable result of a health system dominated by politics.

In the first good news in months, a state appeals board has reversed some of the price controls on the insurance industry that Gov. Deval Patrick imposed earlier this year. Late last month, the panel ruled that the action had no legal basis and ignored "economic realties."

In April, Mr. Patrick's insurance commissioner had rejected 235 of 274 premium increases state insurers had submitted for approval for individuals and small businesses. The carriers said these increases were necessary to cover their expected claims over the coming year, as underlying state health costs continue to rise at 8% annually. By inventing an arbitrary rate cap, the administration was in effect ordering the carriers to sell their products at a loss.

Mr. Patrick has promised to appeal the panel's decision and find some other reason to cap rates. Yet a raft of internal documents recently leaked to the press shows this squeeze play was opposed even within his own administration.

In an April message to his staff, Robert Dynan, a career insurance commissioner responsible for ensuring the solvency of state carriers, wrote that his superiors "implemented artificial price caps on HMO rates. The rates, by design, have no actuarial support. This action was taken against my objections and without including me in the conversation."

Mr. Dynan added that "The current course . . . has the potential for catastrophic consequences including irreversible damage to our non-profit health care system" and that "there most likely will be a train wreck (or perhaps several train wrecks)."

Sure enough, the five major state insurers have so far collectively lost $116 million due to the rate cap. Three of them are now under administrative oversight because of concerns about their financial viability. Perhaps Mr. Patrick felt he could be so reckless because health-care demagoguery is the strategy for his fall re-election bid against a former insurance CEO.

The deeper problem is that price controls seem to be the only way the political class can salvage a program that was supposed to reduce spending and manifestly has not. Massachusetts now has the highest average premiums in the nation.

In a new paper, Stanford economists John Cogan and Dan Kessler and Glenn Hubbard of Columbia find that the Massachusetts plan increased private employer-sponsored premiums by about 6%. Another study released last week by the state found that the number of people gaming the "individual mandate"—buying insurance only when they are about to incur major medical costs, then dumping coverage—has quadrupled since 2006. State regulators estimate that this amounts to a de facto 1% tax on insurance premiums for everyone else in the individual market and recommend a limited enrollment period to discourage such abuses. (This will be illegal under ObamaCare.)

Liberals write off such consequences as unimportant under the revisionist history that the plan was never meant to reduce costs but only to cover the uninsured. Yet Mr. Romney wrote in these pages shortly after his plan became law that every resident "will soon have affordable health insurance and the costs of health care will be reduced."

One junior senator from Illinois agreed. In a February 2006 interview on NBC, Mr. Obama praised the "bold initiative" in Massachusetts, arguing that it would "reduce costs and expand coverage." A Romney spokesman said at the time that "It's gratifying that national figures from both sides of the aisle recognize the potential of this plan to transform our health-care system."

An entitlement sold as a way to reduce costs was bound to fundamentally change the system. The larger question—for Massachusetts, and now for the nation—is whether that was really the plan all along.

"If you're going to do health-care cost containment, it has to be stealth," said Jon Kingsdale, speaking at a conference sponsored by the New Republic magazine last October. "It has to be unsuspected by any of the key players to actually have an effect." Mr. Kingsdale is the former director of the Massachusetts "connector," the beta version of ObamaCare's insurance "exchanges," and is now widely expected to serve as an ObamaCare regulator.

He went on to explain that universal coverage was "fundamentally a political strategy question"—a way of finding a "significant systematic way of pushing back on the health-care system and saying, 'No, you have to do with less.' And that's the challenge, how to do it. It's like we're waiting for a chain reaction but there's no catalyst, there's nothing to start it."

In other words, health reform was a classic bait and switch: Sell a virtually unrepealable entitlement on utterly unrealistic premises and then the political class will eventually be forced to control spending. The likes of Mr. Kingsdale would say cost control is only a matter of technocratic judgement, but the raw dirigisme of Mr. Patrick's price controls is a better indicator of what happens when health care is in the custody of elected officials rather than a market.

Naturally, Mr. Patrick wants to export the rate review beyond the insurers to hospitals, physician groups and specialty providers—presumably to set medical prices as well as insurance prices. Last month, his administration also announced it would use the existing state "determination of need" process to restrict the diffusion of expensive medical technologies like MRI machines and linear accelerator radiation therapy.

Meanwhile, Richard Moore, a state senator from Uxbridge and an architect of the 2006 plan, has introduced a new bill that will make physician participation in government health programs a condition of medical licensure. This would essentially convert all Massachusetts doctors into public employees.

All of this is merely a prelude to far more aggressive restructuring of the state's health-care markets—and a preview of what awaits the rest of the country.

"One Business Filed 37,375 Bad W-2 Forms -- and Is Getting Away With It," by Terry Jeffrey, Townhall, July 2010 --- Click Here

A single employer filed 37,375 W-2 forms in tax year 2005 on which the Social Security Number and the name did not match. These "no-match" W-2 forms often -- but not always -- represent an illegal-alien worker fraudulently using someone else's Social Security number or a fake number.

An employer who files 37,375 no-match W-2s in one year is almost certainly employing many thousands of illegal aliens -- and knows it.

Yet there is no indication our federal government has taken any action to stop this employer from continuing to employ mass numbers of illegal aliens.

The unemployment rate was 7.7 percent when President Barack Obama was inaugurated. It is now 9.5 percent.

The fact that a single employer filed 37,375 no-match W2s in 2005 was revealed in a virtually unnoticed Dec. 15, 2008, audit report from the inspector general of the Social Security Administration (SSA).

The purpose of this report was to examine the effectiveness of the so-called "Educational Correspondence" (EDCOR) that SSA sends out each year to all employers who file more than 10 no-match W-2s if those no-match W-2s also amount to at least one-half of one percent of the total number of W-2s filed by that employer.

These "no-match letters" list the Social Security numbers that were on the no-match W-2s the employer filed -- but only to a maximum of 500 Social Security numbers. Thus, if an employer files 37,375 bad W-2s, the letter it receives from SSA lists only the first 500 bad Social Security Numbers, not the other 36,875.

According to the inspector general, there were about 1,650 employers that filed more than 500 no-match W-2s in 2005. In fact, these 1,650 employers filed a total of about 2.6 million no-match W-2s in 2005, meaning they filed an average of 1,576 per employer.

The champion was the employer that filed 37,375.

To those unfamiliar with this issue, this might seem like an astounding number. If you care to double-check it, go to the Website of the inspector general of the Social Security Administration and look up the December 2008 audit report titled, "Effectiveness of Educational Correspondence to Employers." The number for the report is A-03-07-17105.

If President Obama cares to read the report, I would point him especially to page 7. "Our review found that about 1,650 employers with over 500 name/SSN no-matches had reported about 2.6 million no-matches to SSA," it says. "They received EDCOR letters that included 907,000 of the no-matches. Consequently, they were not informed of about 1.7 million no-matches. These employers had reported no-matches that ranged from 501 to 37,375, and about 44 percent of the employers had reported SSA (sic) 1,000 or more no-matches to SSA."


"Parasitic Tort Lawyers," by John Stossel, Townhall, July 7, 2010 ---

Tort lawyers lie. They say their product liability suits are good for us. But their lawsuits rarely make our lives better. They make lawyers and a few of their clients better off -- but for the majority of us, they make life much worse.

Years back, as one of America's first consumer reporters, I'd avenge harmed consumers by bringing cameras to the offending business and confronting the crooks. My work warned others about the dangers in the marketplace but didn't do much for the victims.

So I thought about those personal injury lawyers. They could do more good -- they could sue bad companies, force them to change and get the victims money. I started referring hurt consumers to lawyers.

Imagine my shock when consumers called to say their lawyers took most of the money!

Even when the lawyers do help their clients, they hurt everyone else because fear of their lawsuits takes away many good things: Swimming pools, playgrounds and gymnastics programs close because liability insurance is so expensive. Kids lose their favorite places to hang out in the summer.

More importantly, innovators dump potentially life-saving inventions. Companies that started work on a safer asbestos substitute, an AIDS vaccine and a Lyme disease vaccine gave up the research because any work in those areas risked stirring up the lawyers. The liability risk was too great.

It's why I've come to think of lawyers the way I think about nuclear missiles. We need them to keep us safe. But we avoid using missiles because we understand the collateral damage they do. We ought to avoid lawyers for the same reason. I'll explore this problem Thursday night on my Fox Business program.

Look at health care. The lawyers claim they punish bad doctors and win compensation for injured patients, and their suits add "less than 2 percent to the cost." But there is another side to that story.

Dr. Manny Alvarez, chairman of obstetrics at Hackensack University Medical Center, points out that 1 or 2 percent is just the direct cost. The indirect costs are far higher because suits force doctors and hospitals to practice defensive medicine and do unnecessary tests.

"If ... you walk in (an emergency room) with a headache, what do they do? They order a CAT scan, an MRI, you name it, " Alvarez said.

They do surgery on people who may not need it. That's safer for the doctor, although it's not safer for the patients.

Vice presidential candidate John Edwards made $40 million to $80 million -- he won't say how much -- pushing tort lawsuits, many of them related to cerebral palsy, which he attributed to doctors not doing C-sections.

What happened afterward? C-sections increased from 7 percent of all births to over 30 percent.

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