How do you east an elephant?

One bite at a time.

This is wisdom that it would behoove politicians to heed. A big part of the problem why Congress can't accomplish anything is that everything has to be "solved" in one colossal singular piece of "comprehensive reform" legislation. Its always "comprehensive this reform" and "comprehensive that reform." Its as if politicians seem to think that the only way to eat an elephant is in one massive bite. And of course, the result being they choke on it. What is so wrong with breaking a problem down into surmountable problems? When you design a computer, you don't start by creating one chip that has every required function integrated on to it. You start by breaking the design down into smaller, tractable subsystems, such as processor, memory, peripherals, power supply, etc. One bite at a time.

For some reason, politicians don't seem to get this basic principle. Part of the problem, I think is that politicians believe that anything worth doing is worth doing with headline grabbing grandiose legislation. They are probably afraid that if they broke things down into solvable problems they wouldn't get grand public recognition for "_SOLVING_ _PROBLEMS_." They want that "big game trophy" to hang on the wall. So instead, they get grand public notice for failing to solve any problems because they try biting off so much they choke on it. And it's also partly "obstructionist politics" that are to blame that creates this environment of an inability to break things down into solvable problems. Whenever someone tries to solve a well defined tractable problem, critics will obstruct this by claiming, "you can't do that because it doesn't solve the WHOLE problem." Well, no it doesn't, it solves one smaller problem that is an important part of the whole problem, and what is wrong with that? Isn't it far better to solve something a bit at a time than failing to solving any of it in one all inclusive colossus? A good example of this is immigration reform. Many ideas were floated to address narrowly defined immigrant issues, and many of these ideas had merit for the issues they were designed to target. However, the critics and nay-sayers responded not by critiquing the efficacy in solving the issues they were intended to address, but rather by proclaiming that each of these solutions didn't address the entire colossal issue of illegal immigration and therefore they can't be considered. Why is it that, for example, border security can only be addressed in concert with addressing every other facet of society touched by illegal immigration? Why can't a border security solution simply deal with border security?

Take "health care." Why does this have to be tackled in one massive colossus that no one can agree on and to which everyone finds something to take exception. President Obama says that now we need to work on passing the parts of health care reform that everyone agrees on. Wow, what a concept. It takes a near fatal torpedoing of the health care colossus to figure out that this should be solved in less ambitious pieces? If it had started that way from the get-go, large portions of the health care conundrum probably could have been reformed by now. Why can't we, say, pass legislation to remove the exemption from anti-trust and anti-competition laws for health insurance providers? Why can this only be done as part of a massive colossus of legislation? Then move on to legislation reforming Medicare/Medicaid to incentivise quality of care instead of quantity and how doctors and hospitals are compensated. And so on, one bite at a time. And sooner or later (and probably sooner than later as compared to the "comprehensive" approach) health care has been reformed, costs have been controlled by making the providing of health care more efficient, effective, and less wasteful.

True, there would not be any celebratory fanfare at the end for all of the politicians to gloat and thump their chests about how wonderfully they have "served the people" regardless of whether or not anyone is actually any better off: "we passed massive legislation that says the people are better off so it must be so - we are so wonderful." There would be no singular "big game trophy" to hang on the wall and point at. But in the end, effectively solving big problems one tractable problem at a time would better server the people. If a smaller, well defined, tractable problem is solved by focusing problem solving on that problem alone without the distractions of trying to deal with it as part of a colossal, over-arching (over-reaching?) effort, much more effective and beneficial solutions will be produced. Thus, taken as a whole, all of the smaller solutions end up producing a better over all "comprehensive" result in the end. That is assuming that something would come of a colossal "comprehensive reform" effort in the first place.

The People Are Speaking. Are Democrats Listening?

In the campaign for this election, Democrats made a point that it was about about a Congressional vote on their health care proposals. They made an issue of the fact that Scott Brown was a vote against their health care proposals. As such, they effectively turned this into a referendum on their health care proposals and they therefore ought to heed the message of that referendum. And now, they have their answer on how the public feels about the Democrats proposals. And it's pretty clear that feeling is "nay." And if a heavily Democratic and liberal leaning state votes against where Democrats are trying to take this country, what does that say about what the rest of the country must be thinking? The question then becomes, will the Democrats heed this message that the people don't want their health care and their other boondoggles, or will they arrogantly cling to the notion that they know what's best for us irrespective of what the people have made clear? (Not that I necessarily think that "The People" are a paragon of contemplative and pragmatic problem solving. It was, after all, "The People" that bought houses they could never afford with loans they could never pay back. Sure it was banks that unwisely offered such loan products to such people, but it was ultimately the people that freely chose to sign on the dotted line.) My wager goes to continued arrogance and denial.

In 2008, the people voted for change and handed a mandate to the Democrats to fix things. It was not a mandate for the liberal demagogues to run amok and ram liberal ideology down our throats. The change was supposed to be to fix things not to trade one nut-job ideology for another nut-job ideology.

From a report on Yahoo News:
"I voted for Obama because I wanted change. ... I thought he'd bring it to us, but I just don't like the direction that he's heading," said John Triolo, 38, a registered independent who voted in Fitchburg.

To which I respond: and what direction did you think Democrats would take us?

I am reminded of the story of the fox and the scorpion. In their travels, a fox and a scorpion find themselves at a river. The scorpion says to the fox, "please Mister Fox, let me ride on your back while you cross the river." The fox replies, "But Mister Scorpion, if I let you on my back you would only sting me." To which the scorpion replies, "But why would I sting you for surely we would both drown?" The fox acquiesces and allows the scorpion on his back. Half way across the river the scorpion stings the fox. The fox asks, "why did you sting me for now we will both drown?" The scorpion replies, "I am a scorpion, why would you think I would not sting you?"

What the people voted for was someone to work to understand the problems we face and create solutions that solve those problems. Instead what we got is the same "tax and spend" "problem solving" that was rejected in 1994. Instead of solving problems with pragmatic solutions that people elected them to do, Democrats have simply resorted to the same out of control "tax and spend" approach to "problem solving" that was rejected in 1994. Unfortunately both Democrats and voters forgot the lessons that led to the rout of Democrats in 1994. And unless the Democrats realize that people want real solutions and not demagoguery and ideology, they may again find themselves soon kicked to the curb. We can't afford Republican inaction and incompetence, but neither can we afford Democrats' incompetent "solutions" that spend mind-boggling amounts of tax payer money without anything approaching actual solutions. If only real problem solving was as simple as mindlessly throwing mountains of money at the problem.

Insurance Companies Are Not Agents of Socialism

Yet people are baffled and outraged when insurance companies don't act as agents of socialism. Now, I understand were the confusion comes from. Insurance companies aggregate cost over a population. However, this is not the same thing as socialism where all pay an equal share regardless of what they receive. In socialism, everyone pays an equal amount into a pool in order to have access to a resource that may be consumed more or less than by others. The difference is that insurance companies provide a "product" and they charge customers based on the amount of "product" obtained. I will return shortly to what that product is, but first consider the following.

When some one buys a car, the price they pay is determined by the "amount" of the product they are obtaining. Someone who buys a fully option Mercedes is going to pay more than someone buying a stripped down Honda. This makes perfect sense. The Mercedes costs more to produce than the Honda and the buyer is getting a product with more value than the Honda. It is readily understandable that it doesn't make sense for the two buyers to pay the same price.

So the product that insurance companies are selling is relief of financial liability. Ok, but what does that mean? Financial liability is fundamentally the dollar value of a potential financial obligation times the probability of that liability coming to pass. Considering cars again, if someone having a Mercedes has an accident it likely will cost more to repair than someone with a Honda having and accident simply because it typically costs more to repair Mecedes than Hondas. If both drivers have accidents that total their cars, the resulting financial obligation is greater for the Mercedes than the Honda. The insurance company incurs a greater financial loss for the Mercedes than the Honda and the Mercedes owner receives greater value from the insurance company upon replacement than the Honda owner. In this way, the Mercedes owner receives a higher value product in purchasing insurance than does the Honda owner, and therefore, the policy for the Mercedes costs commensurately more than for the Honda. Also, if you have two Honda owners and one driver is twice as likely to total their car than the other, that driver represents twice the financial liability of the other. That person is twice as likely to require reimbursement for the value of the car. This person is receiving twice the product value from the insurance company and will therefore be charged commensurately higher premiums.

Thus, the value of the insurance product received, as well as the "cost" of providing that product is a function (product) of both the magnitude of a potential obligation and the probability of incurring that obligation. Mathematically, "expected value"/"expected return" is PxV, where P is the probability of the event and V is the value of the event. Essentially, insurance against event V would be priced at PxV (not counting overhead and profit). The greater the magnitude of the liability, the greater the value/cost of the insurance product. The greater the probability of incurring a particular liability, the greater the value/cost of the insurance product. (By value/cost I mean value to the purchaser of the insurance and the effective cost to the insurer in providing the insurance.) So, if event V has a 100% probability of happening, insurance against that event would simply be the the cost of that event. This is why, not surprisingly, we don't expect our auto insurance provider to pay for oil changes. We know we're going to have to have the oil changed, so an insurer would simply add the cost of the oil change to the premium. Yet surprisingly, we expect our health insurance provider to pay for regular checkups and exams. Along the same lines, most people understand that if you've had an accident and then buy auto insurance, it would be absurd to expect the insurer to pay for the accident you've already had. And if they did, they would simply bill you for the full cost of repair, and again, what would be the point in that? And yet for some reason, people expect health insurance companies to pay for the "accident" you've already had, aka "preexisting conditions". Once you already have a medical condition, buying new insurance is no longer insurance, because that's not how insurance works (it's no longer a probability, it's a fact), it's called "financing". That is unless it's being financed with other peoples' money in which case it would be socialism, but still not "insurance" because the people who are financing it are being ripped off because they are paying for a product that they are not receiving. It would be socialism because the person with pre-existing conditions is receiving 1xV but only paying for PxV, while everyone else is receiving a product of value PxV but paying PxV+Cf, where Cf is the (fractional) cost of financing the person with pre-existing conditions who is not paying full price for the value they are receiving. If every just waits until having pre-existing conditions to purchase insurance, who then is paying "Cf"? The result being that the insurer is forced to simply bill each person full price for their treatment and what would be the point of that?

The math governing insurance is virtually identical to that of casinos operating slot machines. A casino operator expects any given slot machine to earn for the casino, on average and in aggregate, Nx(C-PxV) where N is the number of times played, C is the cost to play, P is the probability (fractional, not percentage) of a payout and V is the value of the potential payout. Two things are readily apparent. One is that no sane operator is going to set the cost to play at less that the "expected value" payout as this would simply be a money loser to the casino operator. The second is that some machines will payout and some won't, and in aggregate, this cost to the casino will be NxPxV against the revenue of NxC. The math for insurance companies is the same except that slot machines are individual insurance policies, C is the insurance premium, V is a particular financial liability, P is the probability of realizing that liability, and one play is the term of the insurance policy. (N would thus be policy renewals) So similarly, insurance companies will set the premium C accordingly.

No casino operator in his right mind would put a machine on the floor such that C-PxV is a negative number as this is simply a money loser and the customer is receiving greater value than the cost to play. Alternately, the operator would then have to set C higher on other machines to make up the loss, in which case those players are being ripped off in that they are receiving less value than they are paying for and are subsidizing those who play the machine that pays excessively. This would be the socialist version of a casino and people would simply choose to play the machine that pays excessively and not play the machines used to subsidize this. Obviously, with no one playing the "ripoff" machines, there is nothing with which to subsidize the machine with excessive payouts and this cannot continue indefinitely. This makes perfect sense, yet people are surprised when health insurance companies refuse to provide insurance to people with pre-existing conditions or refuse to renew policies of those with "excessive" claims: preexisting conditions puts P at 100% and serious illness increases V. With a probability of 100% of requiring treatment for an illness, the insurer would simply set the premium C at the cost to treat the illness, 1xV, and what would be the point of that? Except that what is being expected of insurers is exactly that of implementing the "socialist casino."

I am not saying what is right or ethical or anything like that. What I am saying is that expecting insurance companies to act as agents of socialism, and being surprised and outraged when they don't, is simply irrational and unrealistic in view of the business models and economics principles, and fundamentally the math involved. Socialism is mathematically and economically a loser as a business model so it should not be surprising when entities in the business of insurance don't act as agents of socialism. It is unreasonable to get outraged at a lion for acting like a lion when that is the role it plays in the environment. Lions play an important role in the environment and expecting it to be somehow different is to ignore the principles governing the environment. Similarly it is unreasonable to get outraged at insurance companies for acting like an insurance business and not like socialists when insurance is the product they provide to the economy. Insurance companies provide a vital product to the economy and expecting it to be somehow different is to ignore economic, business, and mathematical principles.

"Deficit Neutral" Is Not the Same Thing As "Free"

And that's not a misunderstanding our current administration and Congress is going to shine a light on. In fact, it is arguable that this is a misunderstanding they are actively fostering.

What exactly does "deficit neutral" mean anyway? It simply means that the item in question does not result in the government spending _NET_ more than they take in. It completely ignores the fact of how much more cost the taxpayers must shoulder. This means that one way or another, for a "deficit neutral" new program, we are paying at least as much more to the government as they are increasing their spending to pay for this new program. You could write a bill that increases spending by $10 billion but raises taxes by $20 billion and then you could claim that the bill _reduces_ the deficit by $10 billion. And you would be right. It would; however, add $20 billion in new taxes that we taxpayers have to pay for. This definitely does not mean that taxpayers are saving $10 billion. It means, in this case, that taxpayers are paying $20 billion more than they were before.

So President Obama, et. al., are keen to point out that the new health care bill will "not add one dime to the deficit." Gee, Mr. President, thank you for being so "responsible." What they gloss over is the fact that it is not _costing_ us "not one dime" but in fact we will be on the hook for shelling out nearly $1 trillion more to the government than we are already doing today. We will be paying almost $1 trillion more to the government, one way or another, after this bill is passed than before. While deficit neutral is very important, we must not let that cause us to lose sight of the fact that that $0 in deficit spending is costing us $1 trillion dollars. Advocates of this health care bill are working hard to play up the "deficit neutral" aspect in order to hoodwink people into thinking they are getting something for free, while playing down the fact that this is in fact creating $1 trillion in new spending that is paid for by money coming from somewhere. And that somewhere is ultimately us. If program with "not one dime in deficits" is "free," why is it costing us almost $1 trillion more?

Proponents of the health care bill could tack on yet another $1 trillion in new taxes on top of the $1 trillion it will end up costing us and proudly proclaim that this bill is _reducing_ the deficit by $1 trillion. Wow, what a deal that would be! _Free_ health care AND reducing the deficit by $1 trillion to boot! Never mind the fact that such "free" health care and deficit reduction would end up COSTING us $2 trillion. Beware of "tax and spend" politicians proclaiming "responsibility" with "deficit neutrality" and car salesman proclaiming low monthly payments. If "deficit neutrality" is the only metric that matters, then how come we always end up paying more taxes to get it?

Tax or Vigilantism?

Obama says he wants to levy a tax on ALL financial institutions regardless of whether or not they received TARP finds and whether or not having received them they have paid them back. His justification? They are all to blame. Really? He gets to decide that unilaterally? So we're also going to punish financial institutions that acted responsibly, for no other reason than that they are financial institutions and therefore deserve to be punished anyway just because we don't like them much? I thought we had a court system to levy blame for wrongdoing. If they have done something wrong that deserves punishment, then in our system of government, that is supposed to be decided in the courts. Punishing people or organizations outside of the purview of the legal system is simply vigilantism. In this case, using the tax system as the cudgel. This is not entirely unexpected since liberals see nothing wrong with taxing people regardless of any factual merit simply because they don't like them very much.

In a system of "rule of law," citizens and organizations are supposed to be able to be assured of living in peace without government harassment if they follow the law. Unfortunately, liberal politicians have no qualms about molesting law abiding citizens simply because they don't like them very much. Liberals seem to think there are two governments: the government that derives from the US Constitution and the one imposed by liberal demagogues that hand down their own social order, regardless of what the Constitution says, often times using the very mechanisms that were originally intended to implement the Constitution. To avoid harassment by the government it is not sufficient to follow the law but one must also appease the liberal demagogues. Vigilantism is alive and well within our own government. Sadly we don't object as long as it is someone else being harassed. Liberals have learned well from McCarthy.

Too Soon for More Troops in Afghanistan?

John Kerry says it is too soon to send more troops to Afghanistan until the issues surrounding the election are resolved. He says he doesn't see how President Obama can't make  a decision until the issue is resolved. Really? So does Sen. Kerry think the Taliban and Al Qaida are waiting until the election is resolved? I thought the troops were to push back Al Qaida and the Taliban. Or maybe he thinks we should follow Pakistan's strategy of allowing the militants to gather strength before taking action. What Sen. Kerry does not seem to grasp is that the motivation for sending troops is to prevent the militants from gaining ground and they aren't waiting until the election is resolved.

Be Careful What You Wish For

Nancy Pelosi is hellbent on a partisan witch hunt, aka "truth commission," to go after individuals who, right or wrong, had the audacity to have a different opinion that the authorized liberal ideology. Now, it seems that that witch hunt has shed a light on skeletons in her own closet. Now, the Republicans are employing the favorite tactic of liberals of the "what did she know and when did she know it" witch hunt. Even President Obama advised against the pursuit of this witch hunt. But Nancy Pelosi in her all-consuming vindictive obsession with anyone who dare oppose the liberal ideology, refused that advice and is now paying the price of that short-sightedness. But then when anyone calls for a "truth commission," truth is usually the last thing on the agenda, or it is at best selective truth to support the preconceptions and agenda.