In the August 24 & 31, 2009 issue of Newsweek, Sharon Begley claims that there are many “lies” flying around about the Obama health care plan, partially because people are scared right now.  She quotes a psychiatrist, Louann Brizendrine on the subject: “The brain is signaling ‘danger’ right now.  Whenever that happens, the brain typically loses its logical reasoning power.”

Presumably then with her reasoning and logic unclouded by emotion, Ms. Begley exposes several “lies” about the health care bill  in her article entitled, “Attack!  The truth about Obamacare.”

Well then, I’m going to get illogical and dispute her expose on a couple of points.

Begley writes, “Opponents say bureaucrats will decide if it is worth treating you by somehow calculating the value of your life.

It’s not in any of the bills, but the rationing lie sticks because people who should know better keep repeating it”  (end quote).

Irrational and emotional point number one: Just because rationing is not in any of the bills, does that eliminate the danger of rationing once government takes over health care?

Is it conceivable that the government could run into fiscal problems at some point in the future and start making cuts in Medicare, Medicaid, Social Security and any government run health care program?  Is it emotional and irrational to ask the question?  (Maybe it’s even considered hateful.)

For a graphic illustration of how critical entitlements are to the national debt, please go to the bottom of this Webpage and notice the numbers under “US UNFUNDED LIABILITIES.”  Compare the “LIABILITY PER CITIZEN” number with the number at the top center of the page, “DEBT PER CITIZEN.”  As you can see by comparing these two numbers, our national debt is going to balloon exponentially and dangerously, unless drastic cuts are made to government entitlement programs.

Even the most liberal economists agree that there is a limit to how high the debt-to-Gross Domestic Product ratio can go before countries run into catastrophic problems.  We are on that road.  (Please see my last blog where this issue is discussed by Nobel Prize winning economist Paul Krugman and I give my analysis.)

Another “lie” Ms. Begley mentions is that the Obama health care plan “will cover illegal aliens.”  She counters with, “(No illegals will be covered.  But don’t worry: under today’s system, some of your insurance premiums do pay for their medical treatment, to the tune of $1 billion a year, because illegals are guaranteed emergency care in every state.)”

Irrational and emotional point number two: If, under our current health care system, illegal aliens are receiving health care paid for by part of our insurance premiums, how will that change when the government takes over?  Does Obama plan on throwing illegal aliens out of emergency rooms on their ears?  I doubt it.

Maybe she’s saying that the government will eat the extra cost of the illegals and not pass it on to health care consumers.  If that’s the case, I’d like to know where she gets her confidence.

I don’t consider myself an ideologue against government managed health care.  But I would like to see our government operating in a fiscally responsible way before even considering socializing our health care system.  In addition, I strongly believe our elected officials should read the health care bill before voting on it. Is there such a hurry to pass this thing that we can’t read it?  If Begley sees these views as fearful,  illogical and emotional, then I find that opinion very interesting.

From Michigan, here’s one congressman’s  opinion on reading the health care bill.

Website Recommendation!

My friend Brian Johnson runs a great Website.  This guy knows what he’s doing and I wouldn’t include his link if I thought otherwise.  If you want to get some excellent free training in the art and science of technical stock trading, check it out!

In Brian’s words: “My site is www.thestockmentor.com and it’s geared towards people who are interested in trading or learning how to better manage their own retirement accounts through stock charting. I have a lot of free online videos that explain the basics of trading and each day I do a daily video on the markets and where I see them going next. I also highlight some individual stock picks I’m watching during the course of that week as well.”

Quote of the Week:

“When you’re 50 you start thinking about things you haven’t thought about before.  I used to think getting old was about vanity, but actually it’s about losing the people you love.  Getting wrinkles is trivial.”

~Joyce Carol Oates

Buried News of the Week

Prominent banking analyst foresees 150-200 more bank failures

New York Times columnist and economist Paul Krugman won the Nobel Prize for economics in 2008, primarily for his work in the areas of international trade and economic geography.  He recently wrote this interesting article.

He makes a case, with caveats, that three factors saved us from a second depression: 1. government spending in the face of falling revenues 2. rescuing the financial sector 3. the American Recovery and Reinvestment Act (the Obama Stimulus Plan).

Three things initially struck me about the article: 1. Why did Krugman make no mention of the dangers of our budget deficits and national debt? 2. Has Krugman considered the possibility that the rescues and spending could prolong the economic downturn, especially if it leads to killer inflation and/or loss of our AAA credit rating? 3. I’m not as confident as Krugman that we have avoided a second depression, as I’ll cover in my portfolio update at the bottom of this blog.

After digging around on Youtube, I did find this clip of Krugman discussing how much debt he thinks this country can handle.  I now have a theory as to why Krugman isn’t too concerned about the issues I raised.  Incredibly, I don’t think he’s considering Social Security and Medicare entitlements when estimating the viability of our future debt-to-GDP ratios!  Is this possible?

Note that at 2:50 in the video, he makes the statement that “Deficits do matter but we have 5-6 trillion dollars to play with here.”  How do we have that kind of money to “play with” when you consider the trillions of entitlement debt?

Can a Nobel prize winning economist really be ignoring tens of trillions of dollars in debt?  It seems hard to believe.

Bill Gross founder of Pacific Investment Management Company has a very different view from Krugman, as quoted in this Bloomberg article. Look how much estimated debt-to-GDP ratios change when entitlements are considered.

From Bloomberg: “Gross, manager of the world’s biggest bond fund, said on May 21 the U.S. will ‘eventually’ lose its AAA credit rating after Standard & Poor’s lowered its outlook on the U.K.’s AAA to ‘negative’ from ’stable’ amid an escalating ratio of debt- to-gross domestic product. While U.S. marketable debt is at about 45 percent of GDP, annual deficits of 10 percent will push the amount to 100 percent within five years, a level that rating companies and markets view as a ‘point of no return,’ he wrote.”

“The U.S. growth rate ‘requires a government checkbook for years to come,’ Gross wrote. Coupled with Medicare and Social Security entitlements, government borrowing could reach 300 percent of GDP, meaning ‘the Chinese and other surplus nations cannot fund the deficit even if they were fully on board,’ he wrote.”  (Bloomberg)

For an illustration of how important entitlements are when estimating debt-to-GDP ratios, please check out this clip from the Glenn Beck show.

Quote of the Week:

“We’re going to go bankrupt as a nation.  Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’  The answer is yes, that’s what I’m telling you.”

~Joe Biden, speaking during an AARP Town Meeting in Alexandra, VA (here’s a link to the video).

Portfolio Update:

I’m not sure we’ve reached the bottom of this downturn.  I’m still standing by my prediction of Dow 5,500 or lower.

And don’t worry, I’ll still take credit if there’s a big terrorist attack or H1N1 flu outbreak that helps tank the economy.

I believe we will have another market downturn within weeks or months, so I’m still being very cautious.

For now I’m holding core positions in IShares Silver Trust (SLV) and SPDR Gold Trust (GLD).  I’m also trying to trade around the ups and downs of silver and gold.

In addition, I have a position in Agnico Eagle Mines (AEM) and a position in Federated Prudent Global Income Fund (PSAFX).

I’ve taken a horrible hit on my speculative position even though it’s more than doubled since the first of the year.  Broadwind Energy (BWEN) manufactures wind turbines and are one of the purest wind plays around.  ‘

Shortly after I bought it at around 27 bucks, Jim Kramer said on his Mad Money show, “Broadwind’s going to 40.”  It never reached 40 but tanked instead.  For a while there I thought that rascal meant 40 cents instead of 40 bucks!

Buried News of the Week

Are compulsory H1N1 Flu Shots Being Planned?

Some of us are old enough to remember the swine flu shots of 1976.  If shots are being planned, I hope they do a better job this time.  (In ‘76, over two dozen people died from the vaccine and the vaccine turned out to be unnecessary.)

See you next time!