The Politics Of ObamaCare Premiums

The Daily Caller posted an article today about the collusion between the Obama Administration and health insurance companies to insure that healthcare premiums for consumers would not increase drastically just before the midterm elections of 2014.

The article explains:

New documents reveals that top White House adviser Valerie Jarrett personally conducted damage control with nervous health insurance companies after those companies saw no other way to hold premiums down under Obamacare without a taxpayer-funded bailout.

Their pleas worked.

A month later, the Obama administration issued rules to allow for a taxpayer-funded insurer bailout.

At a time when the federal budget is spiraling out of control, the Obama Administration is spending taxpayers’ money to avoid a political problem before the election.

The risk corridor program is set up so that consumers will not see the full impact of ObamaCare on their insurance premiums until 2017–after the midterm elections.

ObamaCare needs to be exposed totally for the disaster it is and ended as quickly as possible.

Using Taxpayer Money To Delay Insurance Increases Until After 2015

The Daily Caller posted a story today about the possibility of the Government having to bail out insurance companies because of the lack of participation by young people in ObamaCare.

The problem is that young people are not signing up for ObamaCare. The article reports:

While there’s still time for young adults to sign up, the Obama administration has a lot of ground to cover in just two months. If not, a bailout via the “risk corridor” provision could offer a temporary fix.

“If [a bailout] does occur, it’s certainly going to hold down the size of the premium increases next fall and the year after,” Tanner told TheDCNF, “but the bailout only goes until about 2016 — so in 2015 we can begin to see significant increases” in the amount Americans pay for their health care costs on Obamacare exchanges.

The risk corridor program would partially reimburse insurers for losses only through 2016, allowing the underlying problem to come out in full force during the presidential election season.

The article states that the bailout’s cost to taxpayers could run as high as $25 billion, but that would only delay the rise in premiums until the election campaign season. It will be interesting to see how the Obama Administration handles this problem–the bailout will show the problem with ObamaCare regarding actuarial figures. Insurance companies base their premium costs on actuarial tables that calculate risk and allow the companies to make enough money to stay in business. If insurance companies do not make money, they do not stay in business. Subsidizing insurance companies for two years does not solve the actuarial problem–it simply delays it. The Republicans need to come up with a better way to help Americans get insurance–without a government takeover of the insurance industry.

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Where Are The Fact Checkers ?

Yesterday CNS News reported that despite President Obama’s statement on Thursday that “we got back every dime we used to rescue the financial system,” the Congressional Budget Office (CBO) has stated that the government will lose about $24 billion on the bailout.

On Thursday, President Obama stated, “We got back every dime we used to rescue the financial system, but we also passed a historic law to end taxpayer-funded Wall Street bailouts for good.”

The article reports the CBO’s statement:

“The cost to the federal government of the TARP’s transactions (also referred to as the subsidy cost), including grants for mortgage programs that have not yet been made, will amount to $24 billion,” said the CBO report, which was released on the same day Obama spoke.

…CBO said that the cost of TARP “stems largely from assistance to American International Group (AIG), aid to the automotive industry, and grant programs aimed at avoiding home mortgage foreclosures,” noting that the losses will be so large they will eclipse the financial gains the government will realize from bailing out other large financial institutions.

It really is time to tell the truth about how American taxpayer money is spent and to rein in the budget.

 

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About That Successful Bailout Of General Motors

President Barack Obama, with Assembly Manager ...

President Barack Obama, with Assembly Manager Teri Quigley, drives a new Chevy Volt, during his tour of the General Motors Auto Plant in Hamtramck, Mich., July 30, 2010. (Official White House Photo by Pete Souza) (Photo credit: Wikipedia)

One of the accomplishments that President Obama is citing on his ‘stump speech’ is his bailout of General Motors. So far the taxpayer has lost about $25 billion on the bailout. I have posted a number of articles about the lack of sales of the Chevy Volt during the past year (you can use the search engine at the top of this site if you want to read them). The bottom line is that even with the government paying customers to buy the car, the car is not selling. There have also been a number of fires in the Chevy Volt after minor accidents.

Yesterday USA Today reported that General Motors is shutting down its Chevy Volt assembly line for a month and retooling it to produce Chevy Impalas.

The article reports:

“We are not idling the plant due to poor Volt sales. We’re gearing up for production of the new Impala,” Chevy spokesman David Darovitz said in an email.

Maybe I just don’t understand business, but it seems to me that if a car is selling well, you don’t suspend production of that car for a month.

 

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Why The Government Shouldn’t Meddle In Business

President Obama is citing his bailout of the auto industry as one of his accomplishments. I wonder if he has seen the numbers.

The Detroit News posted a story today that a report by the Treasury Department has estimated that the government will lose more than $25 billion on the $85 billion auto bailout. That is almost a third of the cost of the bailout!

The article states:

The report may still underestimate the losses. The report covers predicted losses through May 31, when GM’s stock price was $22.20 a share.

On Monday, GM stock fell $0.07, or 0.3 percent, to $20.47. At that price, the government would lose another $850 million on its GM bailout.

The government still holds 500 million shares of GM stock and needs to sell them for about $53 each to recover its entire $49.5 billion bailout. At the current price, the Treasury would lose more than $16 billion on its GM bailout.

This is how much it cost the taxpayers to avoid General Motors’ going through a structured bankruptcy. The government bailout violated the basic bankruptcy laws. The bailout was nothing more than the taxpayers giving the company to the unions. This sort of activity needs to be avoided in the future!

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Would You Let These People Manage Your 401K ?

 

Logo of General Motors Corporation. Source: 20...

Logo of General Motors Corporation. Source: 2007_business_choice_bro_en.pdf (on GM website). (Photo credit: Wikipedia)

John Lott posted an article at National Review today about what has happened to the money used to bail out General Motors.

The article reports:

Three years ago his administration invested more than $100 billion in taxpayer money to bail out General Motors. On Tuesday, the entire company, not just what the government owns, was worth less than $34 billion. By anyone’s definition, that investment is a glaring failure. Yet over the last few days the Obama campaign, in a $25 million marketing blitz, has flooded the airwaves with ads in battleground states, claiming the bailout should be counted a rousing success.

The contrast between the facts and the campaign ads is amazing.

Another thing conveniently not mentioned in the campaign ad is the number of automobile dealerships that were put out of business in the General Motors and Chrysler bailouts.

The article reminds us:

The only real winners from the GM bailout were unions, which were protected from pay cuts, from losing their right to overtime pay after less than 40 hours a week, and from cuts to their extremely generous benefits. They faced only minor tweaks in their inefficient union work rules.

As for “hundreds of thousands of new workers,” the truth is closer to a tenth of that.

Having just $34 billion to show after a $100 billion-plus investment would get a chief executive of any private company fired. Unfortunately, Obama does not seem to understand how this money has been wasted.

Would you let these people administer your 401K account?

 

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This Slogan Only Works If You Ignore The Facts

The Washington Free Beacon posted an article today reminding us of some inconvenient truths about the government bailout of the automobile industry. Since one of the campaign slogans of President Obama’s campaign this year will be, “Osama Bin Laden is dead, and General Motors is alive,” it might be wise to take a look at some of the facts surrounding the auto bailout.

The article reports:

The administration has already written off $7 billion in taxpayer losses in the American takeover of Chrysler and General Motors; those losses are expected to climb as high as $23 billion—27 percent of the $85 billion spent on the bailout.

While the bailout is widely credited with saving the two companies, increasing taxpayer losses have made it nearly as unpopular in 2012 as it was when Obama was elected. More than half of Americans still disapprove of the auto bailout compared with 61 percent in 2008.

Aside from the taxpayer losses involved, there is the violation of bankruptcy laws. We have laws for a reason–if they are wrong they need to be changed (these particular laws are not wrong), but until they are changed, they have to be followed.

As was pointed out at rightwinggranny in June of 2009, in bailing out Chryster, laws were broken:

The issue here is the secured debt.  The government is trying to pressure those who hold secured bonds to accept less than the value of the bonds so that other creditors can be paid.  We need to remember that one of the basic principles of bankruptcy law is that secured creditors (who loaned money only on the contractual promise that if the debt was unpaid they’d get specific property back)  get paid off in full before unsecured creditors get anything.  To do anything else is a violation of the US Constitution and its rules on private property rights.

Laws were broken in the auto bailouts in order to hand the companies over to the unions. Some Americans remember that. General Motors is alive, but aside from the taxpayer losses, the government and the unions have much more power in running the company than is appropriate.

The article at the Free Beacon further reports:

“They came in and forced these companies into pre-packaged bankruptcy where unions were made whole and creditors were squeezed out,” the expert said. “In normal bankruptcy they don’t rearrange stakeholders rights willy-nilly…there’s no way those union contracts would have been untouched.”

Labor is not the only constituency to which Obama has tried to appeal by championing the bailout.  “After three decades of inaction, we’re gradually putting in place the toughest fuel economy standards in history for our cars and pickups,” Obama said in the same February speech. “That means the cars you build will average nearly 55 miles per gallon by the middle of the next decade—almost double what they get today.”

Obama tied the bailouts to strict environmental standards that have led to increasingly efficient cars, an achievement he has used to woo green advocates. The move has affected more than just the environment, establishing “dangerous” legal precedents, according to some legal experts.

General Motors may be alive, but it is a whole lot less free than it was before President Obama said, “I’m from the government, and I’m here to help you.”

 

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An Interesting Perspective On The Auto Companies Bailout

Today’s Wall Street Journal posted an article on the auto bailout and the cost to American taxpayers. The article mentioned the fact that in order to get taxpayers’ money back, shares of General Motors will need to rise to $53 from their current $26 to recoup the Bush-Obama investment. But that’s not the real cost of the bailout.

The article reminds us:

However things shake out, it will be only a fraction of the true costs in precedent and politicized investment. The bailouts signaled that major companies with union labor are too politically big to fail and undermined confidence in the rule of law. More troubling, the conversion of Detroit from an indirect to transparent Washington client continues to distort the auto market.

Last November, Mr. Obama’s enviroteers tightened fuel economy regulations again, jacking them up to 54.5 miles per gallon by 2025—well beyond the standards Congress set in 2007. The auto makers agreed despite their misgivings because as wards of the state they had no political choice. So Chrysler, GM and Ford will still be forced to make cars that dealers struggle to sell profitably, only many more of them.

The rule of law was not followed in the bailouts, and that will create problems for the companies in the future.

The article concludes:

The point is that the auto bailout isn’t an example of enlightened government revitalizing an industry after a market failure. It is a bailout in the wake of failed government policies and bad management that may keep going and going as Washington does whatever it takes to make sure Detroit keeps doing its political bidding.

Government meddling in the private sector is never a good idea.

 

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