Formula for More Government Control

By: Allen Wells

# 016 March 28, 2009

Here we go again… Republican Senator Orrin Hatch of Utah has started a search committee to investigate the Bowl Championship Series because the Utah “Utes” didn’t make it last year… word is that he is using the Federal Government catch all concept “racketeering!“ I just want to thank Senator Hatch and the rest of the Republican gang for reminding me that the Republicans are the still party of smaller government and less government intervention. Stories like this tend to restore my faith in the system…

Folks, it’s coming… government is becoming more ubiquitous (ever-present) in our lives every day. Will our elected politicians stop at anything? What we must understand, if we allow the government to intervene into the financial aspect our lives, we must expect them to encroach upon every aspect of our lives. By intervention I mean federal subsidies, payouts, grants, etc. Most people think intervention is just new laws and new rulings by the executive agencies and new taxes.

For you more analytical and mathematically inclined, I’ve created a formula for this concept:
Subsidy x Taxes ÷ Laws = Control

You probably won’t see this formula in an economics text or on the pages of Bloomberg or the Wall Street Journal or even USA today, but that is only because it is too simple and makes too much sense. Let me explain (it’s about the money… and re-election): We do not realize each time we allow the government to take money from someone else and give it to us (or a “cause” we agree in) we are agreeing to more and more government encroachment or control or intervention (you choose the word).

For example, the big battle going on in New Hampshire (“Live Free or Die”) is the mandatory seat belt law. New Hampshire is the only state in the Union that does not have a mandatory seat belt law. By not having this law, New Hampshire does not receive several million dollars in Federal highway funds. On one side you have those that claim seatbelts may save lives, but the government has no right to tell them what to do in their own personal vehicle. I agree with this principle. I think I should be free to live safely or kill myself dangerously. The federal, state or local government should have no jurisdiction over my body.

Here’s the problem with that concept in today’s society. We have Social Security, SSI, Medicare, Medicaid and other various hodge podges of Federal and State welfare programs to pay the cost for illness or injury and to pay the spouses and dependents of those who die or are severely injured. This money is extracted from the producers of this nation at the threat of incarceration, confiscation of property or worse (through a process called taxation), placed in a pool or fund and then returned back to the dependents (with a “small handling charge” retained by the government). Depending upon the age of the dependent, some of these payments continue for many, many years after the person’s death, resulting in a substantial ongoing expense for the government.

You may disagree with these programs in principle, but I’ve never heard of anyone that turned down any of these funds or payouts “on principle”. We accept the money or subsidy because we “deserve” it. After all, we paid our taxes.

If we agree that the government should have a program to compensate the spouses and dependents of those that die, then we must agree with laws that try to “protect” us from early death or injury. The argument ceases to be about government intervention in our lives and becomes a question of protecting the investment. In order for the government to protect this “fund”, they must try to control the risk factors. This is the basic tenet of any type of insurance.
Insurance is nothing more than a bet, the insurance company is betting (based on statistics and actuarial tables) that you will not file a claim that exceeds their ability to create income from your premiums. You are betting that you will have a claim that exceeds your premiums. If you do not believe that you will have a claim that will exceed your premiums, then why buy the insurance?

With the Federal Government’s insurance programs – SSI, Medicare, Medicaid, etc. (and coming soon: national health care) the Federal Government cannot make that bet. They must insure or cover everyone that needs covering. The government cannot increase your premiums as a result of your “at risk” life choices. If you die skydiving and you have dependents – your dependents will still receive the benefit. If you have a privately marketed insurance policy that excludes skydiving and you are killed skydiving, your dependents will not receive a benefit. The amount you paid for the coverage is not relevant because skydiving was excluded. The only choice the government has is to outlaw certain types of behavior. Not wearing a seatbelt is a behavior that is outlawed in 49 states.

This also includes moral decisions or other “at risk” lifestyle choices. An ongoing battle for years has been the legality of same sex marriages. Follow the money. Do you think insurers have a moral issue with same sex marriages? Certainly not. The issue is cost. To insure a male homosexual in an “at risk” lifestyle without being able to mitigate the exposure with higher premiums is unacceptable to a profit seeking organization. Insurance companies are not humanitarian organizations, they are businesses.

The argument can be made that two homosexual males involved in a monogamous relationship are as healthy and insurable as heterosexual couples involved in a monogamous relationship.
The dilemma for insurances companies is that they not allowed (by law) to delve into your personal lives and relationships. They can check your medical records, credit, etc. but insurance companies cannot make a decision on what some would call “moral choices.” Insurance companies make their decisions based upon statistics and actuarial tables. From a risk standpoint a heterosexual couple will have far less medical expenses than homosexual couples. This is not a racist or homophobic statement. I personally don’t care who you live with or who you “marry”. Marriage in the eyes of God and marriage as a civil institution are two different things. Homosexuals are more likely to acquire devastating and debilitating illnesses than heterosexuals. Insurance companies are not allowed (by law) to mitigate this risk with higher premiums for homosexual couples –everyone must be treated equally. By virtue of this, most insurance companies choose not to insure homosexual unions.

If you think insurance premiums are high now, wait until Federal Government legislates and end to “discrimination” between heterosexual unions and homosexual unions. Premiums will go up because the cost of doing business will go up. This is another “hidden” way your life changes, or your expenses increase because of government intervention. This is also welfare by legislation. The insurance companies savings as a result of your “not” at risk life style will serve as a subsidy for others at risk life style.

Now, back to government insurance programs. By necessity the Federal Government must cover all claims equally. It cannot “hedge” its bets with exclusions and riders. The only choice the government has is to exercise more control over our lives in order to keep the cost down. Do you really believe your state legislature or congress really cares if you wear a motorcycle helmet (or a bicycle helmet) or a seatbelt? They don’t – they are trying to reduce risk to reduce cost. Seatbelt laws may have saved lives or reduced serious injury. From a cost stand point (hospitals, surgery, recovery, etc.) severe injuries are often more expensive (to the bill payer) than death.

When we submit to government welfare programs… yes, these programs are welfare programs… we are required to submit to the requisite government control in our lives. When we ask the government to intervene with a law that makes property insurers pay for damage claims to our homes as a result of natural catastrophes (that are specifically excluded from our policy), we are agreeing to allow the government to tell us how to build our homes, how to live in our homes, where to build our homes and so on. We are also agreeing to allow the government (through law or administrative decision) to take funds from the insurance company and redistribute it to us.

I think Supreme Court Justice Louis Brandeis hit the nail on the head:
"Experience should teach us to be most on our guard to protect liberty when the government's purposes are beneficent ... the greatest dangers to liberty lurk in insidious encroachment by men of zeal, well meaning but without understanding." Olmstead vs. United States, United States supreme Court, 1928

With every welfare program and subsidy, new laws must be passed to mitigate the exposure to the overall cost or expense of these same programs or subsidies. In order to maintain control over society new laws must be passed. These laws, no matter how benevolent they seem continue to make each one of us a law breaker in our own right.

This explains my formula:

Subsidy(Government subsidies and welfare programs) x (multiply the need for more income) Taxes (government creates income by taxing producers) ÷ (need to mitigate risk) Laws (how the government mitigates risk) = (results in) Control (more intervention in our lives, actions, relationships, making us all law breakers in some shape, form or fashion)

“There's no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren't enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible to live without breaking laws”. Ayn Rand


With warmth and regards (as always),
Allen
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