Get Out of the Way

A recent Gallup® poll found that Americans believe the top three most important problems facing the country are unemployment, the economy, and the federal debt.  I agree.  Unemployment has remained above 8% for 42 consecutive months; the federal debt is more than $16 trillion.  As Election Day rapidly approaches, the candidates are spending a considerable amount of time talking about how to fix the economy and stimulate job growth.

I know that a President cannot fix the economy or create jobs.  But a President, along with Congress, can create and implement policies that promote economic growth, which in turn, stimulate employment.  They can also create policies and regulations that hinder growth.

For an indicator of what U.S businesses think of the candidates and their economic policies, I went to the U.S Chamber of Commerce website (http://www.uschamber.com/).  There I found a link to an article titled, “Small Business Owners: Uncertainty Holding Back Hiring”.  What I read is bothersome, to say the least.

As I’ve written before, small businesses are the backbone of our economy and a good gauge of our economic health.  Most small business owners believe the expiration of 2001 and 2003 tax cuts will significantly impact business growth and 58% have no plans to hire.  Of the small business owners surveyed, 72% believe the new health care laws will make it more difficult to hire new employees. Nine out of ten small business owners are concerned about the “fiscal cliff”. The fiscal cliff is the automatic tax increases and spending cuts that take effect at the start of 2013 if Congress does not produce deficit reduction legislation.  If Congress fails to act, the cuts and tax increase are expected to cause a recession relapse (http://www.nytimes.com/2012/05/23/business/congressional-budget-office-warns-of-a-fiscal-cliff.html).  So, rather than hiring, employers are taking a wait-and-see approach.   

On the U.S Chamber of Commerce (USCoC) website, I also found the written testimony by the USCoC Vice President for Environment, Technology, and Regulatory Affairs, William L. Kovacs, to the U.S. House of Representatives Committee on the Judiciary (http://www.uschamber.com/sites/default/files/091812tesimonyRegulationNation.pdf).  In his testimony, Mr. Kovacs states that the scope and pace of federal rulemaking has drastically increased in recent years and the increases impact the cost of doing business.  Mr. Kovacs cites a Small Business Administration study that found the total cost to comply with federal regulations was $1.75 trillion in 2008.  That’s a significant cost.  How many federal regulations have been added since 2008?

The Code of Federal Regulations (CFR) is the collection of rules and regulations passed by the federal agencies of the executive branch of the U.S. government.  In 2008, the CFR was almost 158, 000 pages.  Since then, the executive branch, headed by the President, expanded the CFR by more than 11,000 pages for total of over 169,000 pages of rules and regulations!

Mr. Kovacs points out that many regulations are beneficial and necessary.  He also points out that many regulations are imposed without regard or understanding of the costs of implementation or impacts to employment.  In his testimony, he cites specific examples of impacts on business resulting from federal regulations.

I’ve written before that small business employs nearly 50% of U.S. workers (http://active-thinker.blogspot.com/2012/07/you-didnt-build-that.html).  Small businesses are an extremely important part of the U.S. economy.  When asked what they want from Washington, 78% of small business owners said they want Washington to “get out of the way.”  Maybe the best way to grow the economy and create jobs is to elect a president and congressmen who will get out of the way of economic growth. Otherwise, we really are headed for the cliff.

Affordable Health Care?

A few days ago, a friend related, after a visit to the doctor, that a sign in the doctor’s waiting room stated that the doctor would no longer accept Medicare patients.  Another friend mentioned seeing a similar sign in his doctor’s office.  I wondered why these doctors would refuse Medicare patients, so I did some digging.

Back in February, Congress voted to extend payroll tax cuts. That legislation also postponed a 27.4% cut in Medicare physician payment rates, freezing current payment rates through December 31, 2012.  In July, the Centers for Medicare and Medicaid Services released its proposed Medicare physician fee schedule, listing the various fees and allowed charges for which physicians will be reimbursed by Medicare.  The cuts contained in the proposed schedule are approximately 27%. 

A quick survey of the web indicates that most medical insurance coverage reimburses doctors at a higher rate than Medicare. By agreeing to accept Medicare patients, physicians receive a fixed payment for services, regardless of the charges.  With large payments cuts looming in the future, doctors are trying to figure out how to keep their practices from going under.

In order to stay in business, the physician must ensure that their costs of services are less than the amount paid by the patients.  To reduce costs, the physician may reduce staff, increase the number of appointments, and/or eliminate some services.

Dr. Sowell writes in his book, Basic Economics, that price controls lead to a deterioration of quality in good or services.  If you’ve been frustrated when scheduling an appointment, having been told the first available appointment is weeks or months in the future; or frustrated by the long wait time once you arrive; or disappointed that the time actually spent with the doctor is mere minutes, you would likely say the quality of service is diminished.  Another option physicians have to decrease costs is to limit the number of Medicare patients they see. 

Doctors are choosing to drop out of Medicare.  A recent survey by the Texas Medical Association showed that number of physicians accepting Medicare dropped from 78% in 2000 to 58% in 2012.  Many believe that the low reimbursement payments and the bureaucratic hassle do not provide enough incentive to provide care for Medicare patients.  So to reduce costs and remain in business, doctors are no longer accepting Medicare patients, the very ones who, quite often, need the most health care.

 If a medical practice can’t remain financially viable, then, like any other business, it must reduce costs or close its doors.  It’s that simple. The next time you hear a politician or candidate speak about “affordable health care”, find out how they plan to make it affordable.  Lowering the costs of health care, such as lowering costs of regulation compliance and administrative costs, makes it affordable.  Simply lowering the price of health care doesn’t make it affordable, it makes it scarce. 

The Policy of Good Intentions

During a newscast concerning the impacts of this summer’s drought which is decimating corn crops, the reporter stated that the President planned to direct the military to buy extra beef to alleviate the burden on farmers.  Corn is a major ingredient in livestock’s diet.  The reporter also discussed how this action, while it may help beef farmers, does nothing to help dairy farmers.  I am sympathetic to the farmers’ plight.  Farming is a tough job with little influence over the weather, disease, or pests.  But what if the military didn’t buy extra beef?  Would the farmers flood the market when they take their cattle to market early, thereby lowering beef prices?  Sure, the farmers would take a loss, but wouldn’t lower prices be good for the rest of the economy? 

 

The newscast quickly moved on to a related story that really surprised me.  The report stated that many lawmakers were requesting the Environmental Protection Agency (EPA) suspend its mandate concerning ethanol production.  It turns out that approximately 40% of this year’s corn crop is mandated to become ethanol.  Lawmakers wanted more of this year’s crop, limited due to the drought, to be available for livestock feed.  Why is the EPA controlling the distribution of the US corn crop?  I had to find out, so I did some research.

Here’s what I found. In 2007, Congress passed the Energy Independence and Security Act (Public Law 110-140), which amends certain provisions of the Clean Air Act.  The 1990 version of the Clean Air Act required the EPA to establish a national renewable fuel program. The purpose, according to the EPA website, is to significantly increase the volume of renewable fuel that is blended into fuels.

By law, the corn-based ethanol production quota for 2012 is 13.2 billion gallons.  According to a Cornell University study (http://www.news.cornell.edu/releases/Aug01/corn-basedethanol.hrs.html), it takes 21.6 pounds of corn to create 1 gallon of ethanol. That’s 5.1 billion bushels of corn required to meet the quota. The study also states that it takes 70% more energy to create ethanol than is available in ethanol. So why are we using it in gasoline if it’s so inefficient?

Supporters say that using ethanol as a fuel reduces dependence on foreign oil and reduces greenhouse gases (i.e., carbon dioxide).  Does it really? Ethanol has only 67% of the energy contained in gasoline, so a gallon of 90% gasoline-10% ethanol (designated as E10) has 96% of the energy of a gallon of gasoline.  I drive roughly 6,500 miles per year to work and back.  Assuming my vehicle gets 20 miles per gallon, that’s 325 gallons of gasoline.  With E10, my vehicle will only get 19.2 miles per gallon.  That means 338.5 gallons of E10 to travel 6,500 miles.  So I use an extra 12.2 gallons of gasoline per year to travel the same distance using E10.  E10 isn’t as efficient as gasoline and at $4 a gallon that is $48.80 more out of my pocket.

And, E10 isn’t better for the environment.  Gasoline produces 2.44 kilograms of carbon dioxide per liter burned and ethanol produces 1.94 kilograms of carbon dioxide per liter burned.  However, because I have to burn more E10 than gasoline to drive the same number of miles, the E10 produces more carbon dioxide than the gasoline.  A study by Stanford University, indicate that increased usage of ethanol as a fuel increases smog.

Based on the math, the reasons for using ethanol don’t add up. Converting 40% of the corn crop into ethanol, especially when the corn crop is predicted by the US  Department of Agriculture to be the smallest in 17 years, will drive up corn prices.  The price will be passed along to the farmers and to the consumers.  This, in turn, will drive up food prices.  Not only is corn used to feed livestock, it is also an ingredient in many of our processed foods and beverages.  Given that we already have a weak economy, is it really smart to do this?

Reducing dependence on foreign oil and limiting air pollution are important and necessary.  But, good intentions are not a viable replacement for sound policy.  The country needs an energy policy that makes sense and doesn’t cripple the economy.  The impacts of policies should be analyzed beyond the immediate consequences.  The impacts of the drought will raise the cost of putting food on your table in many ways, but imposing ethanol use versus free market demand shouldn’t be one of them.  Contact your senator (http://www.senate.gov/) or congressmen (http://house.gov/) and let them know what you think about the current policy.  

Legacy of the First Man

One of my childhood heroes died recently. Neil Armstrong, 82, was commander of the Apollo 11 mission, the first lunar landing. As I got older and learned more about the man, I found much to admire about him. He was an Eagle Scout, an engineer, a Korean War veteran, and a test pilot. I was impressed that after leaving NASA, he didn’t cash in on his fame; he became a professor of aerospace engineering, using his experience and expertise to teach future engineers.

By Presidential proclamation, the US flag flew at half-mast in honor of Armstrong.  Many have issued statements concerning Armstrong’s passing, praising him and his accomplishments. NASA Administrator Charles Bolden, stated that Armstrong will be “remembered for taking humankind’s first small step on a world beyond our own.”  My heart goes out to the Armstrong family and I offer my condolences for the loss of a father, a grandfather, and husband.  But I’m not writing to praise Armstrong or his accomplishments; I’m writing about his legacy.

As a child, Neil Armstrong was my hero because he was an astronaut and the first person to set foot on the moon.  He and the 11 other astronauts who walked on the moon inspired me. I wanted to be an astronaut and a pilot because I saw what they accomplished.  The US Space Program’s accomplishments sparked my interest in science and math.  I became an engineer and a part of the US Space Program.

The US Human Space Program has done some amazing things since December of 1972, when the final Apollo lunar mission left the Moon’s surface.  A technological marvel, the Space Shuttle flew 133 successful missions and traveled almost 550 million miles in 30 years.  We’ve launched two space stations. The first one, Skylab, launched in 1973, played host to three crews, with the third crew living on orbit for 84 days, a record for US spaceflight at the time. 

The second, the International Space Station (ISS), has been continuously crewed since March 2, 2000, for over 4300 days.  The ISS vehicle is 239 feet long by 356 feet wide by 66 feet high. The habitable volume is equivalent to a five bedroom house. The eight solar array wings, each 115 feet long by 39 feet wide, generate enough electricity to power 120 homes.  In addition to being an incredible engineering feat, it is proof that we can work in space and we can cooperate with international partners on a grand scale.

Yes, we’ve done some grand things, but the Shuttle is retired and the US has no human launch capability.  Since December 1972, humans have not travelled farther than 380 miles above the Earth.  For the last 40 years, we’ve been making left-hand turns around the Earth.  NASA has no concrete plans to go back to the moon and NASA says it is “… designing and building the capabilities to send humans to explore the solar system, working toward a goal of landing humans on Mars.” 

However, the reality is that NASA’s plans for a new spacecraft and a new launch vehicle are depressing.  According to NASA (http://www.nasa.gov/pdf/664158main_sls_fs_master.pdf) the new spacecraft and launch vehicle would make an unmanned flight in 2017. A second, manned mission would occur in 2021 and proceed with a launch rate of one mission per year thereafter.  There are plans for a second launch vehicle with heavier lift capability, but the plans don’t include taking humans anywhere.

NASA is the agency that implements the US Human Space Policy.  As with all federal government agencies, it exists to serve the American public. Tell NASA, your Congressman, and your Senator what you want NASA to do and where you think we should explore.  It would be a crime for Armstrong’s legacy to end in left-hand turns around the Earth.