Someone Is Spending Your Pension Money

By John Mauldin 

“Retirement is like a long vacation in Las Vegas. The goal is to enjoy it to the fullest, but not so fully that you run out of money.”– Jonathan Clements

“In retirement, only money and symptoms are consequential.”– Mason Cooley

Retirement is every worker’s dream, even if your dream would have you keep doing the work you love. You still want the financial freedom that lets you work for love instead of money. This is a relatively new dream. The notion of spending the last years of your life in relative relaxation came about only in the last century or two. Before then, the overwhelming number of people had little choice but to work as long as they physically could. Then they died, usually in short order. That’s still how it is in many places in the world.

Retirement is a new phenomenon because it is expensive. Our various labor-saving machines make it possible at least to aspire to having a long, happy retirement. Plenty of us still won’t reach the goal. The data on those who have actually saved enough to maintain their lifestyle without having to work is truly depressing reading. Living on Social Security and possibly income from a reverse mortgage is limited living at best.

In this issue, I’ll build on what we said in the last two weeks on affordable healthcare and potentially longer lifespans. Retirement is not nearly as attractive if all we can look forward to is years of sickness and penury. We are going to talk about the slow motion train wreck now taking shape in pension funds that is going to put pressure on many people who think they have retirement covered.

Please feel free to forward this to those who might be expecting their pension funds to cover them for the next 30 or 40 years. Cutting to the chase, US pension funds are seriously underfunded and may need an extra $10 trillion in 20 years. This is a somewhat controversial letter, but I like to think I’m being realistic. Or at least I’m trying.

The Transformation Project
But first, let me update you on the progress on my next book, Investing in an Age of Transformation, which will explore the changes ahead in our society over the next 20 years, along with their implications for investing. Our immediate future promises far more than just a lot of fast paced, fun technological change.

There are many almost inevitable demographic, geopolitical, educational, sociological, and political changes ahead, not to mention the rapidly evolving future of work that are going to significantly impact markets and our lives. I hope to be able to look at as much of what will be happening as possible. I believe that the fundamentals of investing are going to morph over the next 10 to 15 to 20 years.

I mentioned a few weeks ago at the end of one of my letters that I was looking for a few potential interns and/or volunteer research assistants to help me with the book. I was expecting 8 to 10 responses and got well over 100. Well over. I asked people to send me resumes, and I was really pleased with the quality of the potential assistance. I realize that there is an opportunity to do so much more than simply write another book about the future.

What I have done is write a longer outline for the book, detailing about 25 separate chapters. I’d like to put together small teams for each of these chapters that will not only do in-depth research on their particular areas but will also make their work available to be posted upon publication of the book. We’re going to create separate Transformation Indexes for many of the chapters, which will certainly be a valuable resource and a challenge for investors. And now let’s look at what pension funds are going to look like over the next 20 years.

Midwestern Train Wreck
Four months ago we discussed the ongoing public pension train wreck in Illinois (see Live and Let Die). I was not optimistic that the situation would improve, and indeed it has not. The governor and legislature are still deadlocked over the state’s spending priorities. Illinois still has no budget for the fiscal year that began on July 1. Fitch Ratings downgraded the state’s credit rating last week. It’s a mess.

Because of the deadlock, Illinois is facing a serious cash flow crisis. Feeling like you’ve hit the jackpot through the Illinois lottery? Think again. State officials announced Wednesday that winners who are due to receive more than $600 won’t get their money until the state’s ongoing budget impasse is resolved. Players who win up to $600 can still collect their winnings at local retailers. More than $288 million is waiting to be paid out. For now the winners just have an IOU and no interest on their money (Fox).

As messy as the Illinois situation is, none of us should gloat. Many of our own states and cities are not in much better shape. In fact, the political gridlock actually forced Illinois into accomplishing something other states should try. Illinois has not issued any new bond debt since May 2014. Can many other states say that?

Unfortunately, that may be the best we can say about Illinois. The state delayed a $560 million payment to its pension funds for November and may have to delay or reduce another contribution due in December.

Illinois and many other states and local governments are in this mess because their politicians made impossible to keep promises to public workers. The factors that made them so impossible apply to everyone else, too. More people are retiring. Investment returns aren’t meeting expectations. Healthcare costs are rising. Other government spending is out of control.

Nonetheless, the pension problem is the thorniest one. State and local governments spent years waving generous retirement benefits in front of workers. The workers quite naturally accepted the offers. I doubt many stopped to wonder if their state or city could keep its end of the deal. Of course, it could. It’s the government.

Although state governments have many powers, creating money from thin air is, alas, not one of them. You have to be in Washington to do that. Now that the bills are coming due, the state’s’ inability to keep their word is becoming obvious. Now, I’m sure that many talented people spent years doing good work for Illinois. That’s not the issue here. The fault lies with politicians who generously promised money they didn’t have and presumed it would magically appear later.

On the other hand, retired public workers need to realize they can’t squeeze blood from a turnip. Yes, the courts are saying Illinois must keep its pension promises. But the courts can’t create money where none exists. At best, they can force the state to change its priorities. If pension benefits are sacrosanct, the money won’t be available for other public services. Taxes will have to go up or other essential services will not be performed. This is certainly not good for the citizens of Illinois. As things get worse, people will begin to move.

What happens then? Citizens will grow tired of substandard services and high taxes. They can avoid both by moving out of the state. The exodus may be starting. Crain’s Chicago Business reports: High end house  hunters in Burr Ridge have 100 reasons to be happy. But for sellers, that’s a depressing number. The southwest suburb has 100 homes on the market for at least $1 million, more than seven times the number of homes in that price range – 14 – that have sold in Burr Ridge in the past six months.

The town has the biggest glut by far of $1 million-plus homes in the Chicago suburbs, according to a Crain’s analysis. “It's been disquietingly slow, brutally slow, getting these sold,” said Linda Feinstein, the broker-owner of ReMax Signature Homes in neighboring Hinsdale. “It feels like the brakes have been on for months.”

We don’t know why these people want to sell their homes, of course, but they may be the smart ones.

They’re getting ahead of the crowd – or trying to. Think Detroit. I have visited there a few times over the last year, and the suburbs are really quite pleasant (except in the dead of winter, when I’d definitely rather be in Texas). But those who moved out of the city of Detroit and into the suburbs many decades ago had a choice, because Michigan’s finances weren’t massively out of whack. I’ve been to Hinsdale. It’s a charming community and quite upscale. It is an easy train commute to downtown Chicago.

Look at it this way: with what you know about Illinois public finances, would you really want to move into the state and buy an expensive home right now? I sure wouldn’t. That sharply reduces the number of potential homebuyers. The result will be lower home prices. I’m not predicting Illinois will end up like Detroit…...but I don’t rule it out, either. Further, more and more cities and counties around the country are going to be looking like Chicago. Wherever you buy a home, you really should investigate the financial soundness of the state and the city or town.

Pension Math Review
Political folly is not the only problem. Illinois and everyone else saving for retirement – including you and me – make some giant assumptions. Between ZIRP and assorted other economic distortions, it is harder than ever to count on a reasonable real return over a long period. Small changes make a big difference. Pension managers used to think they could average 8% after inflation over two decades or more. At that rate, a million dollars invested today turns into $4.7 million in 20 years. If $4.7 million is exactly the amount you need to fund that year’s obligations, you’re in good shape.

What happens if you average only 7% over that 20 year period? You’ll have $3.9 million. That is only 83% of the amount you counted on. At 6% returns you will be only 68% funded. At 5%, you have only 57% of what you need. At 4%, you will be only 47% of the way there.

To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here.

The article Thoughts from the Frontline: Someone Is Spending Your Pension Money was originally published at mauldineconomics.com.

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Q3 GDP Jumps 5%; Ha! The Crap Behind the Numbers

By Tony Sagami

I was raised on a farm and I’ve shoveled more than my share of manure. I didn’t like manure back then, and I like the brand of manure that comes out of Washington, DC, and Wall Street even less. A stinky pile of economic manure came out of Washington, DC, last week and instead of the economic nirvana that it was touted to be, it was a smokescreen of half truths and financial prestidigitation.


According to the newest version of the Bureau of Economic Analysis (BEA), the US economy is smoking hot. The BEA reported that GDP grew at an astonishing 5.0% annualized rate in the third quarter.
5% is BIG number.

The New York Times couldn’t gush enough, given a rare chance to give President Obama an economic pat on the back. “The American economy grew last quarter at its fastest rate in over a decade, providing the strongest evidence to date that the recovery is finally gaining sustained power more than five years after it began.”



Moreover, this is the second revision to the third quarter GDP—1.1 percentage points higher than the first revision—and the strongest rate since the third quarter of 2003.



However, that 5% growth rate isn’t as impressive if you peek below the headline number.

Fun with Numbers #1: The biggest improvement was in the Net Exports category, which increased by 112 basis points. How did they manage that?  There was a downturn in Imports.

Fun with Numbers #2: Of the 5% GDP growth, 0.80% was from government spending, most of which was on national defense. I’m a big believer in a strong national defense, but building bombs, tanks, and jet fighters is not as productive to our economy as bridges, roads, and schools.

Fun with Numbers #3: Almost half of the gain came from Personal Consumption Expenditures (PCE) and deserves extra scrutiny. Of that 221 bps of PCE spending:

• Services spending accounts for 115 bps. Of that 115, 15 bps was from nonprofits such as religious groups and charities. The other 100 bps was for household spending on “services.”
   
• Of that 100 bps, the two largest categories were Healthcare spending (52 bps) and Financial Services/Insurance (35 bps).

The end result is that 85% of the contribution to GDP from Household Spending on Services came from healthcare and insurance! In short… those are code words for Obamacare! While the experts on Pennsylvania Avenue and Wall Street were overjoyed, I see just another pile of white collar manure and nothing to shout about.

Fun with Numbers #4: Lastly, the spending on Goods—the backbone of a health, growing economy—declined by 27 bps.

In a related news, the November durable goods report showed a -0.7% drop in spending, quite the opposite of the positive number that Wall Street was expecting.

Of course, Wall Street doesn’t want little things like facts to get in the way of their year-end bonus. As we close out 2014, the stock market marched higher and ignored things like:

• The reaction of the bond market to the 5% number. Bonds should have softened in the face of such strong economic numbers, but the “adults” (the bond traders) on Wall Street saw the same manure that I did.
   
• If the economy was as healthy as the BEA wants us to believe, the “patience” and “considerable time” promise of the FOMC should soon be broken…...right?

I spend most of the year in Asia, including China, and I am seeing the same level of numbers massaging by our government as China’s. In China, the government leaders establish statistical goals and the government bean counters find creative ways to tweak the data to achieve those goals.

Zero interest rates.

24/7 central bank printing.

See no evil analysts.

Financial smoke and mirrors.

That’s the financially dangerous world we live in, and I hope that you have some type of strategy in place to deal with the bursting of what’s becoming a very big, debt-fueled bubble.

Tony Sagami

30-year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here.

To learn more about Rational Bear and how you can use it to benefit from falling stocks and sectors, click here.

The article Connecting the Dots: Q3 GDP Jumps 5%; Ha! The Crap Behind the Numbers was originally published at mauldineconomics.com.

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The Best Low Cost, High Benefit Life Extension Technique Available Today

By Patrick Cox

The scientific consensus that has held sway for four decades regarding both exposure to the sun and vitamin D has collapsed. What has emerged in place of the old "settled science" is the knowledge that most people in North America are seriously vitamin D deficient or insufficient. The same is true for northern Europe, and the implications are staggering.

Simply put, unless you're one of the few people with optimal serum D levels—such as lifeguards and roofers in South Florida—you can cut your risks from most major diseases by 50 to 80 percent. All you have to do is get enough D. It also means we can significantly reduce both healthcare costs and the staggering national deficit by taking a few simple steps.

I advise all my readers to get and keep their vitamin D levels up. This is simply because the economic benefits of doing so are so profound. I've come to the conclusions you'll read below because my job as a tech investment advisor requires that I survey thousands of the most recent scientific studies. In the last few years, an overwhelming flood of new evidence has been produced supporting the view that the medical and nutritional establishments have been fundamentally wrong about vitamin D's physiological role and optimal dosage.

I'll include a number of links at the end of this report to researchers and organizations with enormous credibility. They have journal articles online with voluminous footnotes. I would encourage you to then verify even their information and act accordingly.

If researchers are right, the benefits of raising your serum D levels to about 40 ng/ml are enormous. If they're wrong, the risks associated with the recommended therapy are trivial, if not nonexistent, especially if done through supplementation. This is simple Bayesian analysis.

If you do take my advice and perform further research on this subject, you will still encounter holdouts who assert that unprotected exposure to sunshine is always dangerous and that a normal diet supplemented by a daily multivitamin provides sufficient vitamin D. Behind the scenes, however, even the NIH has moderated its position on vitamin D without taking too much blame for having resisted those who have urged reassessment for decades.

Changing Vitamin D Standards and What They Mean

 

Now we know that very few people have optimal serum levels of 25-hydroxyvitamin D [25(OH)D], the principal form of vitamin D circulating in the blood. Moreover, those with more melanin manufacture less vitamin D in their skin, so they suffer disproportionately from diseases exacerbated by vitamin D deficiencies.
Dr. Michael Holick, the researcher most responsible for this radical change in thinking, has described the current state of widespread vitamin D deficiency as a "silent epidemic." It's a serious public health problem that affects virtually all diseases. To understand this change in thinking, we need to review briefly the history of vitamin D and our understanding of its functions.

In the 1890s, the crippling, bone softening children's disease rickets was still widespread in northern states, which has more pollution and a thicker ozone layer than the Northwest. Ozone blocks the invisible component of sunshine, ultraviolet B (UVB), which produces vitamin D in the skin.

In the early 1900s, it was demonstrated that summer midday sunshine prevented rickets. As a result, there was an effort to educate the public, and nearly everybody learned that a little sunshine was good for you. If you're of baby boomer age, your mother undoubtedly told you to go outside and get some sun. That's why.
Ironically, the beginning of the end of this attitude came in 1923 when a means of producing dietary D was found. University of Wisconsin-Madison biochemistry professor Harry Steenbock discovered that the vitamin D content of milk and other organic substances could be increased with ultraviolet (UV) irradiation. This led to the widespread enrichment of milk and the near elimination of rickets. Slowly, the perception of sunshine as healthy began to fade.

For the most part, scientists lost interest in the biological role of sunshine for higher animals. Dr. Michael Holick was the notable exception. For the last thirty years, Holick has been gathering data, doing research, and studying the role of sunshine and vitamin D.

As a graduate student, Holick first identified the major circulating form of vitamin D in human blood as 25-hydroxyvitamin D. He then isolated and identified the active form of vitamin D as 1,25-dihydroxyvitamin D. He determined the mechanism for how vitamin D is synthesized in the skin, and demonstrated the effects of aging, obesity, latitude, seasonal change, sunscreen use, skin pigmentation, and clothing on this vital cutaneous process.

Thanks to his work, we now know that D is not actually a vitamin. It is a "prohormone," meaning that it's a precursor form of a steroid hormone created by conversion in various organs. This active hormone regulates multiple important biological functions. Every single cell in the body has a D receptor—even stem cells. When I asked Holick what the source of his epiphany was so long ago, he explained that it was the simple fact that D is a critical nutrient without a natural food source. It is so important biologically that early humans could manufacture D even during famines.

For that reason, he questioned the conventional zero-tolerance approach to sun exposure that has held sway with dermatologists since the 1970s. Holick, a professor of dermatology himself, lost his teaching position when he published his findings. When he wrote a book on the subject, he was targeted by a well funded PR campaign aimed at debunking him by the leading dermatological organization. Supposedly objective journals refused to publish his exhaustively documented research—research now accepted as both accurate and pioneering.

An Emerging Scientific Consensus

 

About five years ago, the vitamin D climate began to change. Of late, Holick has finally received the recognition he deserves, and he now serves on multiple prestigious boards as well as advises the NIH. He is, incidentally, professor of medicine, physiology, and biophysics at the Boston University School of Medicine.
Holick explains that new breakthroughs in other areas have helped him make his case. With advances in computer processing and the decoding of the human genome, for example, it now appears that a remarkable 2,000 genes are influenced by vitamin D.

In retrospect, it's odd that the lessons learned from the rickets epidemic were not applied sooner to osteomalacia, which is essentially rickets of the aged. In fact, Dr. Holick and others have demonstrated that osteomalacia is preventable and treatable using vitamin D. Osteoporosis, for example, is also related to lack of vitamin D.

That discovery alone is legitimately worthy of a Nobel prize. In Holick's words, though, it's only the tip of the iceberg. Though Holick began documenting the connection between vitamin D insufficiencies or deficiencies and health problems thirty years ago, the scientific floodgates have opened only in the past few years.

Optimal vitamin D serum blood levels, attained through sunlight or supplementation, dramatically reduce the risk of many diseases other than bone maladies. Many of the most serious are ameliorated by an astonishing 50 to 85 percent. These diseases include cancers, from breast and colon to deadly melanoma skin cancers. Yes, that's right. The really nasty skin cancers can be prevented by getting moderate, sensible sunshine or through vitamin D supplementation. Non-melanoma skin cancers do increase somewhat with sun exposure, especially with sunburns. These skin cancers, however, are relatively benign, as they don't tend to spread to other parts of the body. They're easily detected and removed because they appear on skin exposed to the sun.

Melanoma, on the other hand, is the deadly skin cancer that most people erroneously relate to sunshine. Melanomas, however, do not tend to occur on parts of the body that get direct sunlight. This not only argues against the notion that sunshine directly causes them, it makes them less likely to be detected. The bottom line, which is worth repeating, is that the incidence of truly nasty melanoma skin cancer goes down significantly with sensible exposure to UVB-containing sunshine or with vitamin D3 supplementation. Other effects of vitamin D include improved skin tone in general.

Wider Potential Benefits to Vitamin D Supplementation

 

This is not the end of the list, though. The big killers and most expensive diseases respond similarly to adequate D. I'm talking about hypertension, cardiovascular disease, and stroke. So do type 1 diabetes, type 2 diabetes (to a lesser extent), rheumatoid arthritis, peripheral vascular disease, multiple sclerosis, dementia, autoimmune diseases, and apparently even viral diseases such as H1N1 and AIDS.

It takes about 100 international units (IU) to raise serum blood levels by 1 ng/ml in a healthy adult. To get into the optimal range— 40 to 60 ng/ml—one would therefore have to take 4,000 IU daily. It would take even more if you were obese, are taking certain medications, or have one of a number of medical conditions that degrade or prevent the creation of usable D. The evidence, incidentally, is that 10,000IU is entirely safe.
Consider this projection: Once the requisite low-cost vitamin D therapies are fully adopted, Americans could save $50 billion annually in direct and indirect costs of disease. This in turn would have a real impact on our total healthcare spending.

My opinion, based on discussions with experts, is that adults who treat the big killers with sufficient vitamin D could see average increases in life expectancies of six to eight years.

Pertaining to UVB and latitude, Holick says that from Los Angeles south, UVB is present in sunshine year round, though it can be blocked by clouds. Even the palest among us will be unable to get sufficient UVB from sunshine in more northern latitudes. In Boston, for example, UVB is blocked by the angle of the sun from November through February. Edmonton, Canada has no UVB from mid-October through mid-April. Young people can store enough D during summer months to make it through the winter. Older people cannot.

Many of the benefits of D appear rapidly. Holick and others who prescribe D in clinical situations report that patients often experience dramatic improvements in quality of life within months. Not only do hypertension and bone density respond quickly, the neuromuscular impact of D is such that many of those who experience body pains and muscular weakness are quickly relieved when their serum blood levels are adjusted. Depression, irritable bowel syndrome, and various other maladies can respond extremely quickly to the sunshine vitamin.

The Future of Vitamin D Research and What to Do Now

 

Before giving you the links I promised, I'd like to make a few general observations. One is that in every age, much of the mainstream scientific establishment has considered itself to have achieved a final understanding of core scientific issues. It is also true that, in retrospect, it has never been the case. Science is rightly a process of discovery, not a set of established facts.

Recall one recent example of this authoritarian fatuousness: the US government dietary establishment's long insistence that fats are bad. My nutritional scientist wife told me decades ago that this was untrue. It took many years, however, before the importance of omega-3 fats was generally recognized. Remember when eggs, coffee, and chocolate were bad for you?

Moreover, change and scientific progress continue to accelerate at an unbelievable pace. The next decade will see accelerating breakthroughs in world-changing technologies. They include stem cell sciences, as well as RNA interference, cellular engineering, and other life-extending technologies.

The single best source for information about vitamin D and sunshine is Holick's book, The Vitamin D Solution: A 3-Step Strategy to Cure Our Most Common Health Problem. In keeping with the conventions of my profession, I should tell you that I have no personal financial interest in promoting Dr. Holick's book.

In the meantime, his website will provide you with far more information than is included in this article. Another useful site is Grassroots Health. This activist group includes leading scientists dedicated to increasing understanding of vitamin D. Yet another great site is that of an amazing writer out in Arizona, a great read is the "Vitamin D Deficiency Syndrome".

While sunshine and vitamin D supplements do not have a direct "invest in this" recommendation I can give you, I can ask you to consider the bigger picture. If optimal levels of vitamin D can help you avoid disease, as the research suggests, vitamin D could be considered nature's easiest, most direct life extension technique. This investment in your health is just as important as any market based investment you could ever make.

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The article The Best Low-Cost, High-Benefit Life Extension Technique Available Today was originally published at Mauldin Economics.

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Complete Breakdown of Financial Controls in US Government, Says Austin Fitts

Complete Breakdown of Financial Controls in US Government, Says Austin Fitts Former HUD Assistant Housing Secretary and investment advisor Catherine Austin Fitts reveals her thoughts on the ever rising debt ceiling… what Obamacare is really about (and that’s not socialized healthcare)…why over $4 trillion missing from federal programs may not be incompetence, but a covert strategy....how to protect yourself from the constant devaluation of the U.S. dollar.....and what exactly the Popsicle Index measures and why it matters.

Here are a few excerpts:

“I don’t see Obamacare as something designed to offer healthcare. … I think the question comes down to a bigger one, which is, are we going to create a society where one hundred percent of everything is digitized and under central control?”

“Who is the governance system, and why are they behaving the way they are behaving? What we see is literally a psychopathic effort and intensity—whether it is in the energy area, whether it is in the currency area, whether it is in the food area, whether it is in the healthcare area—to get 100% central control and to use digital means to do it, and the question is why?”

“Well, you have a complete breakdown of internal financial controls in the U.S. government.…..You had over $4 trillion of what is called undocumentable adjustments and to this day, [these agencies] have never, as required by law, produced audited financial statements.”

“In my experience, government is not incompetent at all.…..Gridlock is a cover story, incompetence is a cover story. There is a plan, you just can’t see what it is.”

The article Complete Breakdown of Financial Controls in US Government, Says Austin Fitts was originally published at Casey Research.

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10 Reasons Why Obamacare Is Going to Ruin Your Medical Care… and Your Life

By Elizabeth Lee Vliet, M.D.

Of course you've heard of "liar loans"—in the heyday of subprime mortgages, unscrupulous lenders handed out mortgages to practically everyone with a pulse. "So you're saying you make $100,000 a year? Great, check this box titled 'McMansion.'"

We all know how this charade ended. Now Dr. Elizabeth Lee Vliet, M.D., an acclaimed expert on the subject of Obamacare, warns that the delay of the employer mandate by one year will force Americans into a single payer system, raising insurance premiums and encouraging "liar subsidies" that might prove fiscally devastating. Not to mention that under the new health care system, you may well end up dead…

Dan Steinhart
Editor, Casey Research

Obamacare is a hodgepodge of new regulations, requirements, and penalties. I'd like to start by defining three terms, which, while obscure today, should begin to enter our everyday vocabulary as Obamacare continues to take effect:

Health insurance exchanges are the basket of qualified insurance policies that meet the new healthcare law requirements for expanded coverage. These may be set up by the states (many are refusing to do so, due to high cost and fear of bankrupting the state) or the federal government. The Exchanges are supposed to be fully operational by October 1, 2013, but it is questionable whether they will actually be in place by that deadline.

The individual mandate requires that individuals purchase health insurance that meets the new, expanded federal requirements. Individuals who do not comply face a financial penalty. Individuals who fall below minimum income levels will be eligible for taxpayer-funded subsidies to buy health insurance.

The employer mandate requires that businesses with more than 50 full-time employees must provide health insurance for all employees, and that insurance must meet the new standards set forth in the new law. Businesses that do not comply must pay a financial penalty for each employee, which for large companies can run into the millions of dollars annually. This is the piece of Obamacare that has been delayed by one year.

Selective Enforcement

Why delay one component of Obamacare and not the others? More specifically, why delay the employer mandate but not the individual mandate?

To answer that question, we must first understand this fact: Obama wants a single payer healthcare system in the US.

This is not a secret:

Barack Obama, 2003: "I happen to be a proponent of a single payer healthcare system for America, but as all of you know, we may not get there immediately."

Barack Obama, 2007: "But I don't think we will be able to eliminate employer-based coverage immediately. There is potentially going to be some transition time."

These quotes are not taken out of context. Anyone who has been paying attention knows that transitioning to a single-payer system has been Obama's and his cohorts' ultimate goal all along:

Rep. Jan Schakowsky (D-IL), 2009: "Next to me was a guy from the insurance company who then argued against the public option. He said it would not let private insurance companies compete. A public option would put the private insurance companies out of business and lead to single payer. My single payer friends, he was right. The man was right!"

Here, Rep. Schakowsky is suggesting that the "public option" will lead to their desired goal of a single-payer healthcare system. Single-payer proponents no longer use this term, since the public has clearly and consistently opposed it.

The "public option" has been renamed "Medicaid expansion," which serves the public-relations purpose of confusing the public and avoiding calling taxpayer-funded healthcare "single payer."

Jacob S. Hacker (Yale Professor), 2008: "Someone once said to me this is a Trojan Horse for single payer. It's not a Trojan Horse, right? It's right there! I am telling you. We are going to get there. Over time. Slowly. But we are going to move away from reliance on employer-based health insurance, as we should, but we will do it in a way that we are not going to frighten people into thinking they are going to lose their private insurance. We will give them a choice of public or private insurance when they are in the pool. We are going to let them keep their private insurance as long as their employer continues to provide it."

Hacker nicely sums up the underlying goals of Obamacare: not to increase competition or patient choice, but to drive people out of private insurance as a stepping stone to a government-run, single-payer system.

 

Stepping Stone to Single-Payer

Knowing Obama and his cohorts' goals, the purpose behind the delay of the employer mandate seems clearer: to hurry the "transition time" away from employer-based health insurance and to a single-payer system.

By forcing individuals to purchase compliant healthcare plans but not forcing employers to provide those plans, Obama is creating a swell of 10-13 million workers that must enroll in health insurance, but cannot obtain it from their employers. These workers thus have no choice but to use the government-controlled health insurance exchanges, or else pay a financial penalty.

This represents a doubling of the number of workers forced to get health insurance on the exchanges.
Importantly, the IRS has ruled that if workers have access to affordable health insurance through their employer, their dependents are not eligible for taxpayer-funded subsidies on the Obamacare health insurance exchanges.

Now that businesses will not be required to offer health insurance until 2015, workers and their dependents will be eligible for taxpayer-funded subsidies to purchase health insurance on the exchanges.
This will cost taxpayers an estimated $60 billion dollars in 2014 alone to cover the increased costs of subsidies—and the loss of revenue from employer penalties.

This $60 billion figure is before we take into account the "liar subsidies" that will invariably occur now that the administration has quietly removed eligibility verification for taxpayer-funded subsidies.
Community organizers are already being hired around the country to sign people up for the health exchanges. There are no penalties for failing to verify eligibility, and no penalties for signing up people who cannot afford to pay the monthly insurance premiums.

It is set up for disaster, much like the "liar loans" that helped topple the mortgage industry when people were not required to verify their income to qualify for a mortgage.

Remember, by enacting the dual mandates, Obamacare ostensibly was designed to ensure that its costs were borne by businesses, not taxpayers. But when the president decided to enforce only certain portions of the healthcare law and delay others, he shifted the cost of health insurance onto the backs of taxpayers.

This is all on top of the burdensome costs Obamacare has already created. Various studies have projected that private insurance premiums will rise between 20 to 60% in 2014, and some as much as 100%.
How long will the private-insurance market survive with such exploding costs? People will not be able to afford such massive premium increases. That seems to be the point: drive up costs and drive everyone into the arms of government-controlled medical care.

Jeff Smith from Seattle summed it up nicely in a Wall Street Journal letter on June 12:

"I was going to leave my job… to start a business until I shopped around for a healthcare plan: At Group Health, a health-maintenance organization in Seattle, I was given a quote of $842 per month for me and my family. But that would increase to $2,320 starting in January 2014 when Obamacare kicks in—a 276% increase. Why? Because I would be forced to carry coverage I don't want and don't need, such as maternity care. Welcome to the world of socialized medicine, courtesy of the Un-Affordable Care Act."

 

How Obamacare Affects You and Your Medical Care

The delay in the employer mandate is but one of dozens of negative impacts Obamacare will have on your medical services. As an independent physician, I've been discussing these issues with my patients for the past few years, helping them to prepare for what's ahead.
Here are the ten most important points that I tell my patients:

1. Your private insurance premiums will cost more and more each year.

2. You will lose the choices and flexibility in health insurance policies that we have had available up until now.

3. As reimbursements continue to drop, fewer and fewer doctors will take Medicare (for those 65 and older) or Medicaid (people younger than 65).

4. Fewer doctors accepting Medicare and Medicaid causes an increase in wait times for appointments and a decrease in the numbers and types of specialists available on these plans. Consumers would be wise to line up their doctors now.

5. Studies from various organizations and states have consistently shown that Medicaid recipients have longer waits for medical care, fewer options for specialists, poorer medical outcomes, and die sooner after surgeries than people with no health insurance at all. Yet an increasing number of Americans will be forced into this second-class medical care.

6. As more people enter the taxpayer-funded plans (Medicare and Medicaid) instead of paying for private insurance, the costs to provide this increased medical care and medications will escalate, leading to higher taxes.

7. With no eligibility verifications in place, millions of people who are in the US illegally will be able to access taxpayer-funded medical services, making longer lines, longer wait times, and less money available for medical care for American citizens… unless taxes are increased even more.

8. Higher expenditures to provide medical services lead to rationing of medical care and treatment options to reduce costs. This is the mandated function of the Independent Payment Advisory Board: to cut costs by deciding which types of medical services to allow… or disallow.
   
   If you are denied treatment, you have no appeal of IPAB decisions; you are simply out of luck, and possibly out of life. This is a radical departure from the appeals process required for all private health insurance plans. Further, the IPAB is accountable only to President Obama, and cannot be overridden by Congress or the courts. IPAB is designed to have the final word on your health.

9. Under current regulations, if medical care is denied by Medicare, then a patient is not allowed to pay cash to a Medicare-contracted physician or hospital or other health professional. Patients who need medical care that is denied under Medicare or Medicaid will find themselves having to either: 1) look for an independent physician or hospital (quite rare these days); or 2) go outside the USA for treatment.

10. Expect a loss of medical privacy. Beginning in 2014, if you participate in government health insurance, your health records will be sent to a centralized federal database, with or without your consent.

The bottom line is that Americans are losing more and more of their medical freedom. By 2015, so many workers will be trapped in the government-run health insurance exchanges that there will be no going back to the private plans we have today. At this rate, single-payer proponents will drive private insurance companies out of business, which has been their intention all along.

Americans need to become far more proactive about taking charge of their health. The healthier you are, the less vulnerable you are to our degrading healthcare system. It's also wise to consider proactively planning for medical treatment options outside the US.

Dr. Vliet will share her thoughts on what Obamacare will do to medical freedom and privacy—and the steps Americans can take now to preserve both—at the upcoming Casey Research Summit 3 Days with Casey, October 4-6 in Tucson, Arizona.

Aside from Dr. Vliet, our blue-ribbon faculty includes keynote speaker Dr. Ron Paul, economic and investment experts Catherine Austin Fitts, Lacy Hunt, James Rickards, John Mauldin, Rick Rule, Chris Martenson, and many more. Most of the speakers have agreed to attend the conference for the entire three days and mingle with the participants.

This is one conference you don't want to miss, but seats are filling up fast.

Get all the details now—if you sign up today, you can still get our $100 first-come, first-save discount.


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