Conflict of Interest Archives

The Rise of the Risk Management Industry

As he was leaving office, Dwight Eisenhower felt a responsibility to warn the nation of coming threat from within, “In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex.”Â These turned out to be words booth wise and unheeded, as our military expenditures now total nearly that of the rest of the combined nations of the world.

I’m seeing a new threat from within, rising and to some extent already risen. The risk management industry, with insurance companies at its core, has wormed its way, insidiously and Â in many layers, throughout nearly every industry and organization in these United States. This cancer has grown much deeper, though through much the same mechanism as the military industrial complex; by taking advantage of fear, both that of the general populace and corporate and government entities.

A friend of mine recently posted a saying: “A book is the only thing you can buy that can make you richer”. I would argue that another profitable purchase would be a Congressman.Â While I do think there are some career fence sitters in office who pretty much just vote in whichever direction offers them the most favors, I like to think most individuals in government feel like they are doing the right thing, though I think getting to that coveted and contested office nearly requires one to be of the opinion that the ends justify the means, and that it would be distasteful to look too closely at how the sausage was made.

Unlike these individuals, organizations, such as corporations, unions, and political parties, are generally run or heavily influenced by committee and legal advisers. The people of these committees see it as their job to do what is in the interest of those they represent. If, for example an industry of large donors made it clear that their donations to a political party would keep coming so long as the party voted in their favor, then it is quite likely that the party would choose to endorse candidates who have agreed to vote accordingly. They justify this by telling themselves that if they don’t go along, then the other party will, and will win, which logically they would see as being a worse choice than taking the support themselves and Â then trying to enact their own ideology. The beauty of this situation from the donor’s perspective is that they really can’t lose. All they need to do is give support to both sides and threaten to withdraw it from the one who gives them the least in return.

These days, everyone in business is obsessed with avoiding liability. The blame usually comes down on people who start frivolous lawsuits, but really, the system is designed to encourage such things. There are three main players in this: businessesÂ trying to avoid being bankrupted by a large lawsuit, insurance companiesÂ trying to sell coverage without actually having to pay anything out, and the individual or government agencies trying to get money for a perceived violation.

Kaufman’s Law:Â A policy is a restrictive document to prevent a recurrence of a single incident, in which that incident is never mentioned.

Business will hire people to keep track of regulations and create appropriate policies, and it isn’t just legal regulations they are following. Insurance companies have their own regulations, some of which must be followed to get coverage, and others which will nullify their responsibility to pay if they are not followed. The nature of such preventative policies is that they raise both the cost and the complexity of doing business to the point where it is nearly impossible for a small business to be competitive. The regulations have gotten so thick that no one even knows them all. This is of course fine with government and insurance companies alike, since anyone not knowing they have violated a regulation is still going to end up paying a fine or be denied coverage as a consequence.

The profit motive of insurance companies should not be discounted. If nothing else, the mere fact that they are profitable means that they are an inefficiency in the system, a middleman who increases wait times, and decreases care options. Obamacare pretends to be a cost saver in the system. The early claims were that it wouldn’t raise costs to taxpayers, that the healthy would be made to pay for the sick. I was disgusted to read this piece of economic ignorance on CNN Money:

“Getting subsidy-eligible people to enroll is important for the overall success of the exchanges. The first to sign up are likely those desperate for health insurance, so they are a sicker and costlier population. They’ll pay for insurance with or without subsidies. But they must be balanced out by younger and healthier folks, many of whom are likely to be enticed by subsidies, experts say.Â The subsidies were expected to be very popular: The Congressional Budget Office projected that 86% of the 7 million people enrolling in the exchanges for 2014 would be eligible.”

The second problem is one of outreach. Many people, particularly among the lower income, don’t know that they are eligible for subsidies or even that they have to sign up for insurance, said Dan Mendelson, chief executive of Avalere Health, an advisory company for insurers.
“This requires aggressive messaging,” he said. “They need to go into these communities and get them to sign up. The president has been spending his time apologizing.”

So first, the healthy were going to be made to pay for the sick. Now the healthy will have money taken out of their taxes and handed back to them, only to be forced to give it to the insurance companies. And then there is this article in Businessweek, showing that there is a provision in the bill making sure that if the insurance companies find their costs to be too high, that the government will backstop their losses, and also that there are cost saving measures set to make everything seem cheaper at the beginning, which fade out after three years. Â Combine this with the website problems and various postponements, and it really looks to me like they are trying to stall until the midterm elections and put forward the appearance that things are great and they are just working out a few minor glitches, rather than making a bubble that will lead to bailing out the insurance companies that we have already paid three times over.

How many times over do we need to pay for our health care? Back in the day a patient went to the doctor with an ailment, saw them promptly, made decisions between the two of them and then the patient payed a reasonable fee. Now we pay insurance companies, our doctors and hospitals pay insurance companies, the government pays insurance companies, and in return, the insurance companies make us go to a doctor who is in their network, they decide what care to pay for, and if you have a problem with your bill, they leave you on hold until the creditors show up. And if that weren’t bad enough, we can’t even wash our hands of the whole thing and take care of ourselves. We’re mandated to pay for the care we don’t use.

Down With Evil Corporations, Dare to be Stupid

Those of you with facebook accounts have no doubt seen one or the other, possibly even both, of the above and below images (the one below had the caption Dare to be Stupid, Click LIKE & SHARE if people calling for “zero taxes” shouldn’t be using public streets and sidewalksÂ .

The former is an Occupy Wall Street protest. I think there is a bit of validity in the picture in the sense that while government has a monopoly on force, you are allowed to avoid using the products of corporations you don’t approve of in order to vote with your wallet to change their policy. Even so, the Occupy Wall Street message, while vague, seems to be one directed at general wealth disparity of management, rather than opposition to any given company or product.

The latter is a Tea Party protest, with the implication that people shouldn’t be allowed to protest their government in public. These people paid for the things around them, regardless of whether they wanted to. While signs like “CUT TAXES NOT DEFENSE” are hard to defend in our current budget, the post is centered more on the validity of protesting, rather than the flawed message. The first Amendment clearly gives them the right to assemble and redress their grievances, and unlike OWS, they are on public property rather than private.

Both of these posts have tens of thousands of likes and shares. They are unhelpful. They lack substance. They serve only to increase partisan divides through snarky peer pressure.

These two political movements should be embracing each other. They both find their main opposition not in each other, but in the status quo. Ron Paul recently made the point that compromise is when you give up half of your beliefs. He said we need to be finding common ground with others issue by issue, rather than picking one of the two parties and sticking with it blindly. What do they agree on? That those in power are abusing it, that there is too much money in politics, and that the system is broken beyond the point where working within the established system will fix it.

They are bothÂ decentralizedÂ movements, which is both a strength and a weakness. Those in power (the combination of the two parties and their joint corporate masters) are ridiculing both sides on the airwaves. Photos like those above are shown as if they represent the views of the entire movement. On the other hand, without centralized structure, they are able to pull together a group of people who don’t agree on everything, without forcing any of them to compromise their beliefs. They are a hydra, much like many of theÂ decentralizedÂ militant groups around the world. It’s hard to kill something that has no vital organs. And for each, the existence of the other alleviates that which has plagued every third party that has tried to spring up: the kingmaker excuses. If only one of these movements were to exist, the main party on the other side of the spectrum would get an easy win due to the split vote. If they are both strong, the two party system is out of excuses.

Some Ron Paul Videos

Just an update on some recent Ron Paul videos. First up we have a couple from Jon Stewart, who has given a boost of cred to both Ron Paul and himself by highlighting the coporate media’s fear of everything Ron Paul. Stewart shows once again that he earned his place as the most trusted journalist in America. Sometimes all you need is an observant nature and an unwillingness to be bought.

Stewart had him on again more recently. Below is the third part of the interview. The first two parts are there too, but were of less substance. Ron Paul needs to get better at explaining his positions to liberals. It isn’t that he wants to destroy all social programs and safety nets, he is just trying to get them back to a more local level.

There was also this interview on FOX, where he talks about working with the Democrats, and how compromise in the modern political sense is where you give up half of your beliefs. He instead is willing wo choose his allies issue by issue, and find common ground rather than concessions.

Ron Paul Beliefs

Ron Paul makes quite a campaign commercial. Â It’s interesting to see a candidate for president run on a platform of consistency, honesty, peace, liberty, and sincerity, and not have a single one of his opponents question his credentials on any of it. He faces only two obstacles: A corporate financed media who censors his victories, and a fear that a reduction in federal power would bring back the dark ages.

I urge my readers to help with these two hurdles.

On the issue ofÂ electability: If he wins the primary, Republicans will vote for him rather than Obama. Those supporters of Obama who are primarily anti-war will come around as well, since Ron Paul has far more credibility on the issue.

On federal power: Much of the power of the federal government is recent. For example, I see people recoil when they hear he wants to do away with the Department of Education, as if doing so would put us into a situation where all the schools closed and children never learned to read. The Department of Education was created in 1979. If you went to school after that, do you think you got a better education than your parents? Taking the power over education from the teachers and communities and putting into the hands of federal policy makers has taken the substance out of learning and left it cold. Ron Paul seeks to put the power back in the hands of states, communities, and teachers, not to end education.

Be heard. We can’t have the media convincing people that we don’t exist. We need to turn headlines likeÂ Poll: Romney leads New Hampshire, Huntsman in third, Perry in fourthÂ into a rallying cry against a system trying to fix the vote for those in power.

National Budget Vs. Personal Budget

â€¢ U.S. Tax revenue: $2,170,000,000,000 â€¢ Fed budget: $3,820,000,000,000 â€¢ New debt: $ 1,650,000,000,000 â€¢ National debt: $14,271,000,000,000 â€¢ Recent budget cut: $ 38,500,000,000

Got it?

OK, now letâ€™s remove 8 zeros and pretend itâ€™s a household budget:

â€¢ Annual family income: $21,700 â€¢ Money family spent: $38,200 â€¢ New debt on credit card: $16,500 â€¢ Outstanding balance on credit card: $142,710 â€¢ Total budget cuts: $385

I’ve seen the above posted on a number of sites recently. I think it’s valid to think of the budget in these terms.

Sure, there are differences, such as our government’s ability to legally launder money, but the basic principles of home finance do relate, and taking eight zeroes off helps make things imaginable.

Considering that there are approximately 300,000,000 Americans, around half of whom don’t pay income taxes, it isn’t even too far off for figuring your own percentage of the debt.

Gimmicks aren’t going to change this chart. You can tax the people to give out loans (more debt) to small businesses, but that is mostly zero-sum. You can tax the people to pay for unemployment to encourage the unemployed to spend money to stimulate demand for products and thus create jobs, but that is like buying your employer’s product on your credit card in order to keep them paying your paycheck; It gets you nowhere or worse. You can tax the rich dry and barely make a dent in that number.

Just like in your personal finance, if you want to gain wealth, you need to provide something that someone else needs. If we aren’t selling more to foreign nations than we are buying, we are losing.

This isn’t so much a supply or demand problem as it is a relative value problem. If we are going to be on the losing side of this equation, we need to be printing money rather than borrowing it. This may not be fair to the savers, but they will fail right along with the rest of us on the current course.

Printing money eventually devalues it. A devalued currency will make imports more expensive and exports more affordable, putting us to our rightful place in the market again.

I would also support an eye-for-an-eye tariff policy to prevent socialist nations from taking advantage of us. Until one or both of these things are instituted, our economy will continue to decline.

Even with those changes, we also need to reduce our spending on the military, foreign aid, micromanaging regulations, incarceration, social programs for non-citizens, and benefits for public employees.