Thursday, October 19, 2017

Presidential Healthcare Subsidies

We thought just for an instant
We could see the future
We thought for once we knew
What really was important
--Til Tuesday

Another important part of President Trump's healthcare-related executive orders signed last week is that they direct the treasury and health and human services secretaries to cease making payments to heath insurance companies that subsidize policies for people that qualify for subsidies under Obamacare.

Judge Nap explains why those payments were unconstitutional.

Under the Constitution, it is Congress's responsibility to direct federal funds for expenditure. The congressional process requires two steps. First, Congress must create the program using its legislative process. Then, it must pass a second bill that appropriates money from the federal treasury and makes it available to the president for the purpose stated in the first law.

Although the Affordable Care Act become law in 2010, its provisions required several years to roll out. By the time the subsidy provisions of Obamacare took effect, Republicans had regained control of Congress. When President Obama asked Congress to appropriate the funds necessary to subsidize the system, Congress declined to do so.

This is completely within Congress's legal scope. The framers anticipated the very situation confronting Obama and Congress: an increasingly unpopular law no longer supported by Congress that costs money to enforce, with a president eager to enforce it. In such a situation, the framers clearly put the power of the purse in the hands of Congress. "No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law."

When Obama was denied the means to enforce the subsidy portion of his signature legislation, he spent the money anyway. He directed his treasury and HHS secretaries to take fund appropriated for other programs and make subsidy payments to the seven largest health insurance carriers in the United States.

This was illegal.

Trump, after making the same unlawful payments for the first nine months of his presidency, decided to cease the practice last week. Although he should have done so his first day in office, Trump did the constitutionally correct thing.

Wednesday, October 18, 2017

Revenue Neutral

Drawn into the stream
Of undefined illusion
Those diamond dreams
They can't disguise the truth
--Level 42

If a requirement of a tax cut plan is that it must be 'revenue neutral' to the federal government, then it is not a tax cut plan at all. Rather, it is a tax shifting plan. Some people may realize lower taxes, but only at the expense of others who must pay more to the federal government to make up for lost tax revenue.

Revenue neutral tax plans always find special interest groups maneuvering to be among those who don't get the shaft, er, shift.

Tuesday, October 17, 2017

Cash on Hand

I went to my brother
To see what he could do
He said, brother like to help you
But I'm unable to
--Simply Red

One personal finance decision is how much physical cash to keep on hand--i.e., under the pillow, in a coffee can in the backyard, between pages on the bookshelf--for 'just in case' situations. If one focuses on the central bank money printing situation, then the answer is not much. As we move closer to Big Inflation, then the value of paper dollars kept at the house goes to dust quickly.

However, the recent hurricanes offer a reason why it still makes sense to keep some cash around. Power could go off, thereby reducing electronic access to money. Those with cash in hand can make vital purchases that others cannot.

Bank runs, like those in Greece and Cyprus, are another reason. Cash withdrawals could be limited, once again granting only those with physical cash on hand with financial flexibility.

Bottom line: Despite the inflationary environment that destroys the purchasing power of currency, keeping some cash on the premises seems prudent to manage risk associated with extreme events.

Monday, October 16, 2017

Obamacare's Ugly Truth

You're begging me to go
Then making me stay
Why do you hurt me so bad?
--Pat Benatar

Jeff Tucker observes that last week's executive order that allows choice in seeking healthcare coverage defeats the core feature of Obamacare: coercion. The ACA forces risk pools to exist that free people would otherwise never had chosen.

Tucker cites a litany of mainstream media critics who believe that that Trump's executive order is some sort of despotic act. But clearly the opposite is true. The order removes one source of coercion from the system.

Per Tucker, "Once you break this all down, the ugly truth about Obamacare is laid bare: Obamacare didn't create a market. It destroyed a market. Even the slightest bit of freedom wrecks the whole point."

Obamacare is about force, not freedom. It forcibly redistributes wealth from the healthy to the sick. Through its forcible creation of non-market risk pools, Obamacare counters the entire logic of insurance, which is "supposed to calibrate premiums, risks, and payouts toward mutual profitability."

By introducing a modicum of freedom into the system, last week's executive order exposes Obamacare as the true despotic act.

Sunday, October 15, 2017


It's not in the way that you hold me
It's not in the way you say you care

Gold recaptured the flag last week as it moved back above 1300. In addition to being a psychologically important round number, 1300 is an important technical level currently as depicted below.

Let's see if the comeback holds.

position in gold

Saturday, October 14, 2017

Marginal Credit

Will Emerson: These here are the historical volatility limits which, of course, our trading model relies on pretty fucking heavily. Well, we're now so levered up that once it gets outside of these limits, it gets ugly in a hurry.
Sam Rogers: And how close to these limits have we gotten?
Will Emerson: Sam, we're beyond close. We broke through these limits five or six days in the last two weeks.
--Margin Call

Not sure what the corporate universe was for the analysis, but picture reflects the decline in corporate credit quality over the past decade.

Very few AAA companies left--probably even fewer than indicated as credit rating agency scales have relaxed.

Couple that with a burgeoning stable of junk and, once again, the stage is set for credit events.

Friday, October 13, 2017

Bait and Nominate

We can do the innuendo
We can dance and sing
When it's all said and done
We haven't told you a thing
We all know that crap is king
Give us dirty laundry
--Don Henley

Donald Trump's outrageous claims on Twitter and elsewhere constantly keep his adversaries in motion. Many absorb themselves in the president's rhetoric and spend much of their days crafting clever replies and put downs. They rationalize that Trump is unstable and maybe even downright crazy.

Crazy like a fox, maybe? What if Trump's social media remarks are meant, in many cases, to distract? Perhaps many of his off-the-wall comments are designed to bait enemies into looking one way while he acts elsewhere.

Case in point offered here in the WSJ editorial. The author argues that, while the media remains caught up in Trump's tweets, his administration is restocking the federal courts with dozens of constitutional textualists that bear little resemblance to their predecessors. Trump has nominated more that 60 judges and has already filled more vacancies than Barack Obama did in his first year.

The author suggests that, while Trump keeps "baiting the media with shiny objects," he is remaking the judiciary with an extraordinary class of nominees that appear to be, as the editorial title reads, "Scalias All the Way Down."

Thursday, October 12, 2017

Associated Health Plans

The mist across the windows hides the lines
But nothing hides the colors of the lights that shine
Electricity so fine
Look and dry your eyes
--Joe Jackson

Earlier today, President Trump signed an executive order that permits people to purchase health insurance across state lines. The blueprint for this order came from Rand Paul, who posits that this will allow small buyers to band together and form 'association health plans.' The prospective bargaining power of these AHPs promises to push down premiums for many Americans.

Paul discusses the executive order here.

The increased competition and buyer bargaining power facilitated by the order makes it potentially one of the best health care market 'reforms' in many years.

And the beauty of it, as RP has noted, is that this plan "costs zero dollars" and sidesteps the dysfunction on Capitol Hill. Instead, it frees the market to do what it does best via its 'invisible hand.'

Wednesday, October 11, 2017

What Hyperinflation Looks Like

Better get yourself together
And hold on to what you've got
Once the music hits your system
There's no way you're gonna stop
--Miami Sound Machiine

Venezuela provides an example of what hyperinflation looks like. Prices rising at double, triple, and even quadruple digits rates.

Hyperbolic currency exchange rates.

Empty grocery store shelves and associated consequences.

Good thing the Venezuelan situation could never

Tuesday, October 10, 2017

How Would Criminals Vote?

"The liquor business is gonna grow big and it's gonna grow fast. So get in line, buster."
--Panama Smith (The Roaring Twenties)

Following up on yesterday's post. If prohibition comes up for vote, what would be the preference of criminals and wannabes?

The answer is obvious. Prohibition is good for business, particularly the violent kind.