Politicians, Promises and Pork

A few things of interest.

Le Miserables Is Miserable
The death of socialism proves to be a long and dangerous road. In France students are protesting, which has gone from demonstrations to rioting. The country passed legal measures that allow businesses to fire workers under the age of 26 without having to negotiate with a union or offer severance compensation. In other words allow business owners to be true business owners. The outcome from the citizenry have been predictable. They are in essence protesting their ‘right’ to engage in poor work performance and laziness. Surprisingly the French government bit down and refused to grant concessions. Now contrast this with what is going on in America. The illegal immigrant problem, which stems primarily to the lack enforcement with America-Mexico border, derives their problem with those who want to work.

All Eyes On Mollohan. Who?
Who is Mollohan? Well he is West Virginia Dem. Congressman Alan Mollohan. One could speculate that Mollohan may fill the shoes for the long time West Virginia Senator Robert Byrd, formerly of the KKK. While the Democrats are grabbing for anything to stick to President Bush-the Abramoff scandal, the war in Iraq, his low approval numbers Scooter Libby and the list goes on-Mollohan may prove to be the most irreprehensible of them all if the allegations are true. One would have to comb the Wall Street Journal to find the entire story and predictably the big media machine of America provides a different angle. With editorials railing against Bush, Cheney, Rumsfeld, Condi Rice and what they had for breakfast; they have yet to voice their concerns with Mollohan.

As representative Tom DeLay opted not to seek re-election, which caused a fizzle in the Democrat party’s war chest, Mohollan has declared he will not step down from Congress’s ethics committee. Nancy Pelosi, Democrat party top dog, has refused to address this dilemma.

Just who is Rep. Alan Mollohan? Well the twelve term congressman has been able to slip or ‘earmark’ funds for special pet projects in his home state. The funding, a total of $178 million in the past five years, facilitated the nonprofit institution that have spurned job growth. Sounds great, right? This would be nice except for Mrs. Laura Kuhns. She heads up the nonprofit group known as Vandalia Heritage Foundation. The group is financed from the funds that Holloran was able to steer towards his state. Vandalia along with several nonprofits Kuhns heads up are overseeing the construction of the Institute for Scientific Research, which is located in Fairmont, WV. It should be noted that, according to The Journal, Kuhns earns a salary of $102,000 from her nonprofit work and is a former Mollohan staffer.

While Mollohan may appear to wash the backs of this former staffer with his ability to land financing, his is equally clean and with great reward. Mollohan and his wife are partnered with Kuhns and her husband on several real estate partnerships. These include ones located on Bald Head Island, NC that are valued at around $2million (tax assessed). Furthermore rental income from these properties has allowed the Mollohans to invest in other properties on their own. It should be noted, according to The Journal, that none of the properties were located in the Congressman’s home state.

Strangely enough Mollohan has only now stated he become aware of an investigation into his financial transactions. He had previously garnered mentioning when it was revealed that ill famed lobbyist Jack Abramoff’s MZN, Inc, which sought to win influence regarding the Native American casino industry. Mollohan returned the donation. Former Republican Congressman Randall Cunningham of California was sentenced to prison for his role in the scandal. Tom DeLay, Texas Congressman and Republican majority leader, has agreed not to seek reelection. Republican Congressman Bob Ney still may answer to charges. Louisiana Democrat Congressman Thomas Jefferson is still being investigated for his role.

However the press was quick to demonize DeLay, although his charges are about the misappropriation of campaign funds, they cheered when Cunningham was sent off and Ney has already been convicted by them. Additionally the Democrats have sung the same song as well, often screaming cronyism and signs of the supposed ‘corrupt’ Bush party. However when Republican House Speaker Dennis Hastert called for Mollohan to step down from the House’s ethics committee. Democrat Congresswoman of California and House Minority Leader Nancy Pelosi has refused to address the Mollohan’s investigation. Instead and predictably, she said the following:

"Speaker Hastert and his Republican cohorts are responsible for the most corrupt Congress in history, and the American people are paying the price at the gas pump, at the pharmacy and with record-high deficits," Pelosi countered. "The speaker should join me in directing the ethics committee to get to work, and not cast aspersions on the independent and distinguished ranking member."

Part of Pelosi’s anger and denial to address this issue, which if anything questions the concept of ‘arm’s length transaction’ and ‘conflict of interest’, could be the continual slipping slope that the Democrats find themselves in at the present time. She can only criticize and rant against her enemies while shushing her party’s own dirty laundry under the rug. Another aspect is that presently Mollohan faces electoral competition in what is being watched as a key state for the 2006 election. In 2004 George W. Bush swept the state with 56% voting for him. Senator Robert Byrd will enjoy yet again an election year where he faces no competition. If and when the allegations levied against Mohollan ever make it to the front pages and when West Virginian voters see how rich he has become under questionable business transactions, while their state ranks third in per capita income; only then (hopefully) he will be denied Byrd’s heir apparent role. However I would not expect him to retire back to his home state, as his financial disclosure form indicates, Mohollan and his wife can enjoy their real estate spoils on their oceanfront home dubbed the Peppervine House, located on Bald Head Island and not on Mountain Mama.

Italy: Arrivederci!
In a previous blog post the Infinite Speculator criticized the people of Italy and their leaders for their inability to address hard economic reform, scanning through The Economist your author came across the article entitled Basta, Berlusconi (4/6/06 issue).

While the magazine, which has provided your author with great investment ideas in the past, has always been a critic of Berlusconi; they fail to address the seriousness of country’s woes. They cite Berlusconi’s ethics and domination in Italian media, but it would take a success story from the private sector to pull a 180 for the country. They then went on to provide scant detail, very scant detail, regarding Berlusconi and the mafia. I find this strange because while under Berlusconi the camorra (Mainland Italy’s equivalency to the Sicilian mafia.), prosecution and searching down wanted fugitives have hit a feverish pitch but I digress.

The Economist describes Berlusconi’s tenure as a failure. It may have been a failure in the conventional and immediate sense but what is the true failure is the rolling ball of chaos Italy has become at the present. Whether if it was Berlusconi or Il Duce, no elected figure and their party could have curbed what took place in 2005-zero economic growth and growing dependence on the state facilitated welfare system.

However a reformist or at least one that is suitable to The Economist is nowhere to be found, nor to your author for that matter. Berlusconi will probably lose to Romano Prodi, former prime minister and his centre left opponent. Prodi’s crowning achievement was ushering Italy into the Euro currency. This did force Italy to take some serious fiscal reform but later as president of the EU, Prodi proved ineffective and watched as the economic group, which was originally founded on the idea of sound currency, morph into the protectors of socialism. Additionally Prodi, if he wins, will be dependent on a coalition of smaller political parties for support. He will need to grant concessions to Fausto Bertinotti, leader of the Communist Party.

By all accounts the Italian citizenry is unaware of just how bad their economic scene has become. This may prove to be the saddest aspect of them all, especially when one considers Italy is deemed crucial for Europe’s economy, as their country slips into an economic abyss of the likes the EU may not be equipped to handle.

I need surgery-let’s go to Mass
As your author has demonstrated with various essays and opinion blogs, socialism for the long haul almost always fall flat on its face. Economies going on all cylinders could be flying on rocket fuel if they threw off the shackles of socialism. It is the economic theory that wedges between capitalism and communism, attempting to draw upon both. One of traditional hallmarks of socialism has been socialized medicine.

The state of Massachusetts has all but finalized a law, which Republican governor and possible 2008 presidential contender, Mitt Romney has said he will support that will require medical coverage. The government mandated health insurance programs currently in existence is one of the reasons the problems with insurance costs exist however your author will save his assessment until the close of this posting.

What the law states, in layman’s terms, is that employers who do not offer coverage must pay an annual fee of $295 per person. Additionally all others who can afford, must pay for coverage and those who don’t but can, will be fined $1,000. For perspective, the per capita income for 2004 was $42,102 (wikipedia.org). The law allows for those living at $9,500 a year or less free coverage. Those that live at $48,000 or less with a family of three will also have access to free coverage. There is an estimated 500,000 uninsured, which is remarkable when one considers that the state’s population is 6,398,743 (2005).

Now let’s see some figures-

For scenario analysis let us assume that the 500,000 uninsured work for the same employer who pays the $295 per head, which equals $147million. Now according to Kaiser Family Foundation in 2005 single coverage costs nearly $8,000-10,000 per year. A $1,000 fine or $8,000-10,000 a year in coverage? Maybe the estimated 500,000 uninsured represents those who refuse to take on personal coverage this would mean $500 million in fines going straight to the politicians.

Finally for the drum roll-Mass lawmakers have already stated that the first year expected cost will be $316million, given that these are government estimates, one could safely put that figure north of $350millon. By the third year this will total $1billion and once again adjust the figure given the estimation's origin. Furthermore Mass will be eligible to receive a significant portion of funding coming from the federal government and existing state spending. Given the state's past and if this figure climbs higher at a breakneck pace, watch the state government levy additional taxes to compensate the ‘existing state spending’. This is merely a redistribution of wealth, whether it is in dollars or medical service.

While your author applauds the Massachusetts’ lawmakers for their bold attempts it would have been suitable to have this bill coupled with serious tort reform. Why? Well for starters trial lawyers have been getting rich with malpractice lawsuits and it comes at the expense of policy holders. Massachusetts legislators could have put out a referendum where voters could clearly state whether trial lawyers’ fees could be capped. The idea being that true victims of malpractice are justly compensated with a reasonable judgment instead of attaching millions on the original allegations. Maybe change malpractice cases so they would be decided by a judge and not an emotionally sympathetic jury or members of such pool that see ‘payday’ for the plaintiff?

What will become of the medical community? Will doctors and nurses, along with every other profession in the field, leave for states where theoretically their earnings aren’t capped? Don’t think it cannot happen. Currently in Canada doctors, nurses and such are moving to The States. Your author has encountered many our northern neighbors practicing in the field right in his backyard. Your author will throw out some free investment advice-buy stock in insurers and medical saving plans providers doing business in Canada. The government cannot run the system efficiently and more expenses are coming from out of the pockets of Canadians. This free market competition and capitalism 101.

Spiking Rates
Finally and a rather brief conclusion-the unemployment rate is now under 5% for the United States. The 5% is considered a benchmark and by all accounts the economy appears to be going into overdrive. This sounds good but full employment is considered and often results in higher than expected inflation. The Federal Reserve will continue to gradually raise rates in order to offset this assumed outcome of too few dollars buying too few goods. The dollar continues to ‘feel’ weaker and domestic equity markets are exhausting themselves to rally. The foreign markets-in particular the Nordic region, Asia, India and South America have been bull market strong. As the dollar falls in value foreign currencies' values rise, thus appreciation sets in. Investment advice-ditch many US equities and especially homebuilder stocks in favor of commodities and foreign markets. Your author thought that maybe the commodities bull market was slowing with supply ramping up except the demand has kept pace. Buy gold, silver, lead or Japan-just buy!

Thanks for taking the time to read this abnormally long entry!

Infinitespeculator.com