Friday, February 22, 2008

Oh Deer! A Lesson in the Freedom Market

I’m sure you have heard the saying, “there is no such thing as a free lunch.” Whoever came up with that saying had a working understanding of economics. That person understood that somewhere along the line that free lunch was paid for by somebody. Unfortunately many elected officials in Charleston do not understand this most basic of free market economic facts.

Recently State Delegate Ralph Rodighiero (D-Logan) introduced bill H.B. 4498, in an effort to reduce out of pocket insurance expenses of those hitting deer on the states highways. The bill states, “Any person striking a deer on a state highway shall not be liable for repair costs exceeding two hundred dollars regardless of the amount of the deductible required from their motor vehicle insurance policy.” H.B. 4498 is a free lunch bill and somebody is going to have to pay for it.

Those of us that understand economics know exactly who is going to pay for this free lunch. It will be the person purchasing the insurance. The very same person that Delegate Rodighiero’s bill is supposed to reduce cost. Like all businesses, the insurance companies are in business to make a profit. Insurance companies will not simply absorb the cost of fixing the car of every West Virginian that hits a deer without charging the policy holder for the additional coverage that this bill will require.

Currently in West Virginia you are required to have a minimum of liability coverage on your vehicle. H.B. 4498 by default will require all insurance companies in West Virginian’s to sell nothing less than comprehensive (covers deer) with a $200 deductible.

I called my insurance agent to find out what this free lunch would cost. On a 2004 Dodge Pick-Up the difference between carrying liability coverage and a $200 deductible comprehensive is an increase of over $360 a year. Just dropping the deductible on an existing comprehensive policy from $1000 to the proposed requirement of $200 would increase the cost of that same policy over $110 a year. It is easy to see who is going to pay for this free lunch.

The real problem with H.R. 4498 is it that it assumes that West Virginian’s are not able to handle freedom of choice. It assumes that we are not able to make wise financial decisions on our own. The truth is we are able to make those choices and we can do a better job that government can. We understand that if we have a 1989 Cavalier that is only worth $500, it makes no sense to carry a $200 deductible comprehensive insurance policy. We may wish to pick $1000 deductible instead of $200 if we are willing to take that greater financial risk. The economic free market has provided us all with choices in auto insurance. As a result, Delegate Rodighiero is free choosing to purchase $200 deductible insurance on his own, but it will be his choice not the governments.

H.R. 4498 simple takes away our freedom of choice. If passed we will no longer be able pick our insurance based on our need or financial ability. For most West Virginian’s, they will be forced to pick more expensive insurance that they may not be able to afford, want, or need. Government decisions like this one that are not based on sound economic principles or freedom of choice are one of the very reasons West Virginia ranks at bottom of the good economic categories. We must change.

Thursday, February 21, 2008

Perception and Leadership

I was speaking to former Helping Hands director Cheri Alt the other day. She was discussing the issue of how the middle class is perceived to be shrinking. Alt described how the perception of the middle class most people have appears almost unobtainable to many poor. The effort to reach the next level is overwhelming. This has helped to create a strong perception that America is somehow out of whack and needs some kind of serious adjustment.

First, this made me wonder. What is "middle class?"

It used to be that middle class meant that you had a reliable roof over your head, a decent automobile, and the capability to feed your family and pay your bills. After this, you usually had a little left over every month to save for retirement and a vacation. Sure bills caused stress, but more often than not the family did just fine. Until recently, this was not just middle class, but "the American Dream." This middle class still exists in America. The problem lies in what people perceive as "success." We have revised it upward. Now we don't see ourselves as successful unless we can afford all the latest electronics, a house much larger than necessary, new automobiles, and still not worry about bills. The gap between expectations and reality causes anxiety to many. We stress about what we do not have rather than being thankful for the gifts God gave us. I make the same mistake myself very often.

The media does not help. Its views of middle class have been skewed for a long time. Shows like Roseanne, Mama's Family, and Sanford and Son were meant to represent people who in some way were poor. However all had homes and vehicles. Fred Sanford was even a small business owner. Bill Cosby represented middle class, although to many of us in West Virginia, he certainly appeared rich. The Democrats play upon this anxiety when they announce that the United States has a poor economy.

An expectation of rewards without effort, experience, or proof of competency has also helped create the perception that the economy and society itself has problems. The burgeoning sense of entitlement is the sad result of the 1990s liberal experiment with scholastic self-esteem. Children learned that they were all considered excellent regardless of whether they earned it in any way. The same awards went to everyone regardless of whether the individual had actually done something worthwhile. Effort was given the same praise as competency. Students find a rude awakening when they hit college or real life. The shock comes when professors or employers expect actual results, an end rarely demanded before unless the youngster played in athletics or band.

The liberals demand equality of outcome and they offer government as the solution. Achieve too effectively and watch them cut you down to size. If people get left behind it becomes an indication that something is inherently wrong. No other country in history offers opportunity like the United States in the 21st century, if only people will stand up and seize their chances through hard work from the first they they hit adulthood. We just need to remember as individuals that nothing worthwhile comes without struggle and few lessons are remembered better than those learned because of failure. We also need to thank God for the good things in our lives. We may work hard towards certain goals, but American values do not include a guarantee.
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Isn't it amazing that even though the Left has dominated higher education for at least the past three decades, the Republican Party continues to turn out better candidates for leadership in presidential elections? Perhaps the universities of practical business (Romney), military style character (John McCain), the school of hard knocks (Mike Huckabee), etc. do a better job creating leaders than academia. It could also reflect the fact that conservatives constantly must defend their principles and beliefs against established authorities while in school. This forces conservatives to think about what they believe in and why. The result is a much more reasonable and capable leader, as opposed to a guy who throws out inane causal linkages and expects them to be believed without question.

When listening to liberal Democrats, always question the assumptions they make in their arguments. It is here, at the foundation, that their logic always fails. They rely on ideas such as collective guilt, conservative or private sector greed as a primary motivating factor, conservative lack of insight as a truth, the idea that individuals pursuing their own success are somehow immoral, the concept that global warming is an acknowledged truth. If you accept their assumptions, their logic is fine and their conclusions are valid. It is their assumptions that defy reality. Take for example the economy. Obama insists we need significant change because the economy is poor. The economy is still growing! Furthermore the Fed says it will pick up by fall. Get your time machine and bring someone in from the 1970s or 1930s and ask them if 2% growth with low interest rates and inflation are bad. That looks like heaven to those folks.
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A hundred years ago, hucksters sold products called patent medicines. These drugs promised to cure what ailed you, but never informed the customer what composed them. Obama's campaign works on a similar premise. It promises to make you feel better while refusing to offer any substance. Turns out these medicines did make people feel better in the short term because they were chock full of morphine. People get convinced to take the medicines even when they are not ill because the salesmen were extremely slick. A little exercise and better diet would have gone a lot farther than patent medicines.

Republicans offer the reasonable path to a better tomorrow because individuals are expected to work towards their own benefit. Obama offers the patent medicine of government solutions without any expectation of individuals. That's not how this country was founded and built into greatness.

Wednesday, February 20, 2008

Heathergate in the "DA"

The Daily Athenaeum, the WVU student newspaper, has been doing a bang up job reporting on Heathergate at WVU.

Last week, they even extracted a semi-confession from a WVU official "

Here is the latest they are reporting today.

WVU faculty, admin. differ about eMBA

and

‘Degree-gate’ dragging on


I was really inclined to give the University the benefit of the doubt in this matter, but I have yet to see any exculpatory evidence in this matter whatsoever.


There hasn't seemed to be anything to indicate that the allegations are false, and a whole laundry list of distortions and misstatements by WVU officials. I find it hard to believe that this will end well.

Tuesday, February 19, 2008

Failure of Imagination

Barack Hussein Obama recently accused his Democratic opponents, the Republican Party, and everyone else in Washington DC of a "failure of imagination." In Barack Hussein Obama's world, economic cycles do not exist and bad decisions have no consequences. In Obamaland, government is responsible for all the good and bad of society. Since the economy has hit a difficult patch (mind you, we are not even in a recession) Obama has taken the opportunity to say that everyone in the United States government with the exception of him is responsible for mortgage lenders and buyers making less than sound choices. To boot, they are also responsible for General Motors' poor judgment and bad luck as well. Of course the reason why General Motors and the mortgage market are in hard times are, you guessed it, the "failed" war in Iraq.

And you wonder why Clintoncrats and Republicans question this man's worthiness for office. Liberals jumped on George W. Bush in 2000 for failing to know the name of the leader of Pakistan. Obama fails to understand the economy of the United States, or that the war in Iraq is winding down and (surprise, surprise, surprise) we have achieved most of our goals.

Obama supporters don't tend to care that he has little experience or understanding. They say he is a smart guy and he promises change. Assuredly Obama has brains; you can't get to the United States Senate without them. Knowing how to sell a product does not mean you ought to run the company. And what about change? Change can be good or bad. We certainly need change in terms of more deregulation, a simpler tax code, an energy vision that lays more emphasis on domestic production, and many other ideas championed by President Bush but rejected by the last weak willed Republican Congress.

We don't need a guy who thinks government is the end all and be all of this country. Republicans believe change should also come from individuals who dedicate themselves to taking advantages of the opportunities presented by this great country of ours. We are descended from people who did not wait to be handed their success, they aggressively pursued and earned it. The death of the American work ethic comes from us looking to someone other than ourselves. Voting for Obama only furthers that process.

Monday, February 18, 2008

Insurance isn't the problem


This is an interesting story as it highlights one of the fundamental problems with our government. A complete lack of understanding of how businesses operate. There is a bill being presented by Delegate Ralph Rodighiero, D-Logan to regulate deductibles in deer losses to a maximum of $200. So, in plain English, you get hit by a deer, the most you can pay out of pocket is $200. The rest is up to the insurance companies...which is to say that your fellow policyholders will see increased premium to offset the additional cost of this new deductible.

Let's set a few things straight...

1) There is no such thing as "deer coverage". Deer damage is covered by comprehensive coverage. Comprehensive coverage covers damages to your vehicle through losses Other than collision, such as damage by fire, theft, falling objects, storms, collision with birds or animals, and glass breakage. Basically, you didn't do anything wrong as a driver, but your car is damaged and the insurance company needs to fix it. The article does not indicate whether or not ALL comprehensive losses would see a cap on the deductible, or if we are expecting insurance companies to create a new "deer" coverage that will be used to cover just this specific peril.

2) Rodighiero is cited as acknowledging that he won't endear himself to insurance companies with this proposal and states “I’m not here for the insurance companies or the big-dollar people,” he said.“I’m here for the common problems we have as West Virginians. I’ve dedicated myself to doing that and that’s what I’m going to continue to do.”

A noble point, but as an insurance agent, I get paid on a percentage basis. So if you raise everyone's rates across the board, I have not lost my competitive edge, but my income is going to go up. I am not objecting to this because it would cost me money, it would be financially beneficial to my agency, but it is not the place of the government. IF Mr Rodighiero feels bad about deer accidents he should be suggesting a deer control plan, or a government program to re-imburse drivers for deductibles paid for deer losses out of state funds. Afterall, the state is unwilling to control the deer problem in part because it is a way to bring hunters and their money from other states each year. Raise the hunting license cost a couple hundred dollars to offset the reimbursement program, so that all the non-hunters don't pay for the surge in deer each year.

3) The REAL problem is not the deductible, it's not the insurance rate, it's the fact that your constituents, like many Americans, bought a car they can't afford. We see this all the time. The fact of the matter is that this is an optional coverage, you don't have to buy it in order to own or buy a car. You don't even have to fix your car in a deer collision. Granted your car will look bad and/or may not function, but you could just park it. Unless of course your bank requires it as a condition for your car loan. Unfortunately, we see this everyday. Too many people are stuck with car loans that they can't afford because they did not account for the other costs of a car; such as gas, oil, maintenance, insurance, fuzzy dice, etc and the inevitable increase in these costs over the seven years that they financed their car.

My solution when this problem hit me was simple...I sold my expensive cars and bought less expensive, less shiny cars that were well within my budget. I know it isn't always easy, it took us almost a year to get to where we could afford to pay off the loan on one of our cars in order to trade down, but it eventually worked and we now have a firm policy of staying off of the car lots. It is about personal accountability. The car you buy, the amount you pay, who you buy insurance from, which coverages/deductibles you carry... all of these decisions are made by the individual. I don't want to pay for a $200 deductible, I chose a $500 deductible, a law like this would take away my ability to choose and force me to pay more for a lower deductible. Thanks Charleston, but if it is OK I would like to make a few decisions on my own.