Triggerband Web Journal

Last spring, Democrats won a long, politically damaging fight with Republicans to enact a national healthcare reform bill. It is known by many as Obamacare, after the name of our president who pushed so hard to get it passed in the House and Senate. Although his party controlled strong majorities in both chambers, there were Democrats who did not want to vote for such a contentious bill during an election year. Their concerns proved warranted – at least initially – as Republicans destroyed Democrats in the 2010 mid-term elections.

I supported reform at the time and I still do, albeit with a bit less enthusiasm after the public option and a national insurance exchange were left out of the final law. They were in the House’s version of the bill, but the House eventually passed the Senate version, with modifications, because Democrats in the Senate lost a filibuster-proof majority when Republican Scott Brown won Ted Kennedy’s Senate seat in a special election in Massachusetts.

When the legislative “sausage making” process was over and Obama signed his healthcare reform bill into law, it looked like little more than a government welfare program with subsidies to most Americans so they can buy quality insurance at a reasonable price.

However, there is much more to the Affordable Care Act, and I am not speaking of the numerous gimmicks like allowing children to stay on their parents’ insurance until age 26 or filling in the donut hole for prescription drug coverage under Medicare. What this law does is it gives the federal government control over healthcare. In the Affordable Care Act itself, that control is exercised primarily over health insurance coverage. But the Act provides a framework for the federal government to easily exercise authority over other facets of healthcare at a later date through additional legislation or administrative rules.

This may sound unnerving to anyone who does not implicitly trust the judgment and discretion of our national government. Let me ask you a question. What other body is there in the United States that is large enough to solve the problems of our mammoth, disorganized healthcare system?

Now that Obamacare is law, the federal government has the power to try to solve a lot of the problems in healthcare. The first of these problems is the unfairness in our insurance markets, which the Affordable Care Act addresses nicely come 2014. Other equally important, and closely related, issues include rising healthcare costs, physician shortages, and hospital errors. Those are not adequately addressed by this Act so they will have to wait for future legislation or executive orders.

Of course, I must conclude by mentioning that while our government is doing what it can to address financial and administrative concerns in healthcare, we will accomplish the most good by reforming the medical profession itself. I believe there is a medical revolution on the horizon, and I encourage you to be a part of it.

Alexander Typaldos

If you understand how the financial system works – and it doesn’t work very well – you will see that our government ran up the debt on purpose and actually has a good reason for it.

The mortgage loan crisis and the recession that followed caused banks to stop lending. I’m going to breeze over why this part happened and say that it had to do with their reduced liquidity (ability to lend) and dismal growth forecasts (desire to lend).

In our financial system – and the financial systems of other developed nations – money is created through debt. When you borrow money to buy a car, the bank does not lend you its own money. It takes a very low-rate loan from the Federal Reserve Bank and lends you their money at a markup. The Federal Reserve Bank that “loans” money to your local bank does not draw from cash sitting in an account. Instead, it actually creates money out of thin air. When it writes a check, money is created.

Only 5% of money in our nation is hard cash; 95% is numbers on a screen, and it is created when businesses, individuals, and governments take out loans. So when the stock market nearly collapsed in September of 2008, those “numbers on a screen” dropped precipitately in value, and the result was a reduction in the available money supply.

I’m sure you understand how the money supply relates to inflation and deflation. An increase tends toward inflation – each dollar is worth less. A decrease, however, tends to cause deflation in the absence of competing factors. Deflation means that each dollar is worth more. This might sound like a good thing at first glance, but it really means that all your debts, expenses like rent and food, along with consumer goods, effectively become more expensive and burdensome. Do you see why? There are fewer dollars to go around and so they are more difficult to come by, while expenses stay the same for a period of time.

That period of time is not indefinite, but long enough to have a devastating spiral effect on our economy and then the global economy because they are all intertwined. The only known way to avert this is to pump massive amounts of money into our economy. Banks were unable and unwilling to do it themselves, so our government did it. As mentioned above, in our current financial system, the way to create money is by taking debt, and that is exactly what happened. Our national debt exploded, but our lives continued without a great depression.

Politically, leaders in government cannot say they are increasing the debt solely to increase the debt. But that is what they’re doing and they have sound financial and economic reasons for it. Is this okay? In our current system it is necessary, but I would like to see a new system where government creates its own money rather than the Federal Reserve creating it through loans.

What effect will this have on our quality of lives? We’ll probably have another lost decade or two of economic growth. We’ll work longer, retire later, cut back our lifestyles, and spend a greater share of our income on necessities. However, there is still the possibility there could be a financial collapse similar to the one the bailout and stimulus averted.

One more thing: Republicans understand how the financial system works, and they don’t want the economy to collapse on their watch. Expect most of them to say one thing and do another concerning the national debt.

Alexander Typaldos