It was a beautiful day on Long Island today, as my daughter fussed over her cap and gown, getting ready for her high school graduation. The rite of passage that is the graduation ceremony was to be the highlight of our day, the last ritual before going away to college and beginning her new academic and social life away from home and the heretofore familiar surroundings. As most fathers are at this stage, I am very proud of her and her achievements to date and am confident she will do great in college.

As we arrived at the school athletic fields where the ceremony was to take place for the over 600 graduating seniors, the school principal and various dignitaries from the board of education were all lined up to fulfill their respective roles in the process. Among them the familiar face of Charles (Chuck) Schumer, the senior senator from New York was to give the commencement speech.

Opening the ceremony, the senator started with his speech, and I was surprised to hear the exact same one I heard 2 years ago at my older daughter’s graduation. Thinking this to be a bit odd and frankly somewhat lazy, I paid little attention to the drone of “how I became a senator” until the speech’s concluding remarks. The culminating point of the speech was Schumer’s self-aggrandizing statement of having successfully sponsored a new $2,500 tax credit program for middle-class families. Under the program, which will run for 2 years, families will be entitled to claim a $2,500 tax credit per each student enrolled in college, provided that their income meets certain maximum threshold provisions, which he stated would be capped at $200,000.

“For each of you earning less than $200,000, you will now be able to afford to send your children to college,” said the senator. “For those of you making $200,000 and above – well, God bless you.” The audience reacted with an energetic applause to this not so subtle example of class warfare rhetoric.

Setting aside the inaccuracy of the qualifying income limit (according to our research, when combined with the HOPE credit and other tax laws, the qualifying income limit may in fact be $60K for single and $120K for families), the principle notion of government sponsorship of college education based on financial need as opposed to merit should be of some concern.

By targeting the nation’s financial resources on programs which aid less affluent prospective students, we have fundamentally abandoned any notions of meritocracy and replaced them with a need-based social construct. While clearly a popular position among most Americans since it is portrayed as a caring gesture of the government (who would object to receiving a seemingly free gift or in this case benefit, i.e. the proverbial something for nothing?), we should examine its consequences, as in most cases many of them end up being unintended and in the greater context, undesirable.

Should the affluence level of the student’s family be the driving measure in the allocation of government subsidies for the student to attend college?

We are conditioned to answer this question in the affirmative, since in our politically correct dialect the less affluent are part of an affirmative action class. It is therefore our societal obligation, we are taught, to provide access to our nation’s financial resources on a preferred basis to those who are most in need of them, without regard to their individual contribution or their ability to make best use of such resources.

To what degree do we value fairness in the distribution of government financial aid for college education, or does the principle of equality trump all others?

As modern day Americans we don’t seem to place much value on fairness in the manner in which government serves its people. I’ve written on the distinction between equality and fairness in the June 13, 2000 article “Let’s not Confuse Equality and Fairness”. The article exposes our progressively degenerating definition of equality from what was our Founding Fathers’ original intent (equality of opportunity and not that of outcome) to the present socio-marxist interpretation of “… to each according to his needs.” In the long run, the dogmatic adherence to equality according to one’s need necessarily must lead to a polarization of the society and, instead of creating the intended harmony between income classes, it creates an increasingly greater rift between them. Meritocracy has to be, to a dominant extent, interwoven into the decision process in order for a society to survive and thrive.

Since we are now competing for minds in a global economy, how do we rank in their midst?

Since we’ve conceded that the optimal distribution of resources to produce the most effective outcome (only achievable through a merit based allocation) is not the goal, we therefore accept mediocrity as a satisfactory outcome. This, beyond any other force, is likely to have the most far reaching impact on the quality of citizens our education system produces over the long run. Comparing our policies with those of China, India and most European countries, where college entry is earned primarily through exceptional performance, the divergence in the intellectual quality of their college graduates as compared with those coming out of US schools is already becoming more apparent.

Many who would not consider themselves to be affluent, have historically not been able to qualify for any meaningful financial aid precisely because of their tax dollars being dispersed according to an equality formula that has very little, if anything to do with the benefit that the dollars spent will produce. In the case of my daughter, who graduated high school in the top 5% of her class of over 600, her acceptance into a number of very good schools was not matched with any meaningful financial contribution from the government. We ended up making a reasonable compromise, but I have not yet come up with a good way of explaining to her why her excellent performance and exceptional efforts were not recognized by the government of a country of which she will once be a leader.

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Quotation of the Day:

“Let us think of education as the means of developing our greatest abilities, because in each of us there is a private hope and dream which, fulfilled, can be translated into benefit for everyone and greater strength for our nation.”

John F. Kennedy (1917 – 1963)

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• Lottery Tickets: How Do You Pay For Them? As it turns out, your taxes are helping those on fixed incomes to purchase lottery tickets. Not that this is surprising, but it is disappointing. A study carried out in 2009 by Theos, a British think-tank, found that poor Britons spent a greater part of their income on lottery tickets,......
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Today I got a call from my Mom. She and my Dad both live in the city I was born in – Warsaw, Poland. They are both elderly and live off of a government pension akin to the US social security system. The reason she called was to let me know of an excruciating pain she has recently been suffering from, resulting from a progressively degenerative neurological condition in her wrist. As all Poles are, she is entitled to free medical care in government health care facilities under the country’s universal health care insurance program. Trying to get help for her condition, she has visited with several general practitioners covered under her free plan, all of whom admit she needs to see a specialist. The last one finally crafted a referral for her and she is now scheduled to see a neurologist … in three months. Ouch !

Her options now include continuing to suffer the intolerable pain for the next 3 months or pay out of pocket to see a private specialist. The fee for a consultation with a neurologist in private practice exceeds two months of her pension income, but under the circumstances she will have to do just that. The costs of any resulting treatments, if not covered under the government health care plan, may have a devastating financial effect on her and my dad’s retirement lifestyle.

My parents could have opted to purchase private health care insurance coverage which provides access to services in private hospitals and clinics with the most skilled specialists but, because the government program is so dominant and pervasive, the cost of the private alternative is beyond the reach of most middle-class Poles. As a result, it is accessible to only the most affluent (or motivated by dire circumstances and lacking other options) individuals.

Interestingly enough, in many European countries the Polish medical system as a whole is actually touted as one of the better and when compared with the British system in particular, it receives accolades for efficiency and quality of care. What is underscored is the diminishing role of the public plan option and the progressively increasing percentage of services being offered under private insurance. The availability and increasing popularity of the private health care option is viewed with envy. A good summary of these changes in the Polish medical system can be found in this article from CMAJ (Canadian Medical Association Journal). With this shift, as more competition is introduced in the private sector and the dominance of the government program is lessened (or eliminated), my mom might yet one day be able to afford a private insurance plan and access to the highly skilled medical professionals in Poland, heretofore not accessible to her under her existing plan and her present means.

But in the US exactly the opposite direction is being proposed. There can be very little doubt, and certainly countless examples of dysfunctional government programs across Europe and other countries serve as an example, that a private health care system necessarily offers superior services at a competitive price. As I have written in a prior Naked Liberty article on the Dangers of Comparative Effectiveness, instead of experimenting with proven failed systems, the US should adopt targeted approaches to improving those parts of our current system which offer opportunities for improvement, such as for example the implementation of a national electronic medical records system and tax incentives to support wellness and health awareness.

What’s being proposed is like trading in your comfortable and dependable SUV for a Yugo just because you happened to have gotten a flat tire. Let’s fix the tire and get on with our lives without any more government intervening in it.

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Quotation of the Day:

“We should manage our fortunes as we do our health – enjoy it when good, be patient when it is bad, and never apply violent remedies except in an extreme necessity.“

Francois de La Rochefoucauld (1613 – 1680)

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In the immortal words of Laurel and Hardy: “Here’s another fine mess you’ve got me into.”

And there’s probably no better way to describe the situation that California, this once prosperous state, which from the days of the gold rush has attracted millions to its Pacific shores has found itself in. Its golden image, once a magnet for the ambitious, talented or simply enchanted by the beauty of its land and people, is now tarnished by years of fiscal mismanagement and irresponsible government spending.

It is wondrous indeed to note how a state with such riches in natural resources and richness in the diversity of its people can find itself in such financial ruin. The state of California (which if it were a country would be the 8^th largest economy in world) has found itself unable to fund its current fiscal deficit exceeding $24 billion and service its debt of over $72 billion to its bond holders. By any standard definition of insolubility, the state of California is bankrupt. And while teetering on the brink of being in default of its obligations, interestingly the state’s constitution explicitly does not allow it to declare bankruptcy – a curious dilemma.

The reasons which have brought California to this sad financial state are well known and documented. Summarized, it could be captured in the simple premise of having made too many promises without the wherewithal to deliver on them. These include promises made to government employees, such as in cases of retirees ending up with multiple pensions, some in the six figures. They include overly generous social programs, extending across citizens and non-citizens alike; lax enforcement of state entitlements; increasingly hostile tax burden on businesses including a state sales tax approaching double digits. Also most would target the ineffective state constitution which mandates a 60% majority in the state senate to enact major financial reform. By all practical terms such majority has been virtually impossible to achieve, resulting in stalemate on any attempts to curb the state’s insatiable spending appetite.

Whereas the causes of the states virtual collapse can (and will be) studied by many social economist and political analysts, the practical matter of how to address the dilemma and provide a sustainable solution to the California crisis remains. Prior attempts by its governor Schwartzenegger to seek a federal bailout have fallen on deaf ears of President Obama, and rightfully so as the precedent set by such action would be dangerous and ridden with consequences beyond our ability to predict. Furthermore, no constitutional authority has either originally or through any amendments been granted to the federal government to provide for such a bailout.

So what options exist for California? The ones most commonly discussed include:

1. Providing government credit guarantees of California’s debt have been floated (CBS News Story) but generally discounted as too temporary and not addressing the core of the state’s fiscal crisis. Furthermore, guarantees of such an amount could negatively impact on the credit rating of the US government, which itself is struggling with mounting debt and looming inflation. As traditional with the democratic liberal wing, its chief democratic rep. Barney Frank of Massachusetts, chairman of the House Committee on Financial Services is in support of such measures.

2. Allowing the state to default on its obligations has also been floated, but appears to have the support of only the most extreme faction of constitutionalists. Opponents argue that this would undoubtedly create a dangerous ripple effect throughout the US economy, the cost of which would potentially exceed any bailout which would be offered to the state.

3. Aggressive tax increases (primarily in the form of sales taxes) to compensate for the precipitous fall in tax revenues have the support of many of the liberal democrats in the state senate. However, under the terms of the state’s Proposition 13, their enactment has become a virtual impossibility due to the 60% majority provision. Furthermore, California residents have over the last years become increasingly more vocal against that state’s excessive tax rates, further diminishing the possibility of any such actions.

What is discouraging is that no significant momentum exists behind a movement to address what is the root cause of the state’s troubles – state government inaction and excessive tax burdens. In order, first the state needs to procedurally address the ineffective provisions of its state constitution, including Proposition 13. Armed with new powers to reduce the tax burden on its citizens and enterprises, a well targeted reduction in state business taxes, and either personal income taxes or sales taxes would restore vibrancy to the California economy and begin to again attract new investments and spur an influx of productive sectors of the population back to the state.

While in 2005 the US Census was projecting California as one of the states with highest growth rates, in the recent years of financial turmoil the opposite has begun to occur, with residence relocating to less tax onerous states, among them Florida, Nevada or Texas, each with no state income tax.

Tax incentives (instead of tax penalties) have time and again shown that the empowered individual and the entrepreneurial nature which he harnesses are the most effective tools to bring about economic growth and financial health. California would do well by heeding to one of its greatest son’s prolific advice:

“I don’t believe in a government that protects us from ourselves.”
“The best minds are not in government. If any were, business would hire them away.”

 Ronald Reagan (1911 – 2004)

It would be wise for the California governor and state senators to read their state motto (“Eureka”) and in it recognize that the solution to their state’s woes has already been found, tried and proven. All they need to do is act on it.

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As part of the stimulus spending package approved by the government earlier this year, funding in the amount of $1.1 billion was included to sponsor research into comparing the relative effectiveness of one form of medical treatment to another. Such research, as the program’s sponsors and supporters argued, would over time reduce the net cost of medical services by determining which medical procedures offer the lowest cost treatment to address common ailments. Armed with such information, it was further argued, doctors and medical professionals would apply this additional economic data in their decision to prescribe specific medicines and treatments.

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“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness.”

With this opening statement in our nation’s Declaration of Independence, its 56 signers, represented by such great minds as Benjamin Franklin, John Hancock, and John Adams, established a core founding principle for what was to become a new nation; a nation different in its beliefs, values and government structure than any other at the time.

As is the case with many words in the English language, the word “equality” lacks certain precision and has historically been interpreted through different lenses. For example, mathematical equality assures sameness in quantity, but does not ascribe value to the equal results. An equal amount of rain having fallen over a rain forest and over a desert, although mathematically equivalent in volume, does not produce an equal effect. Nor is the magnificence of Niagara Falls’ cascade of water the same as that of a lazy river flowing through the plains, though again the volumes of water may be equal.

Equality as a doctrine in the 18^th century was indeed a revolutionary concept. Not since the ancient Greek and Minoan cultures has equality been written into a societal code of beliefs. So therefore, the opportunity to build a new nation on such beliefs was in and of itself a revolutionary step forward.

In order to understand the intentions of our founding fathers, we have to understand the psychology of the times in which this concept of equality was being presented. Indeed, we need to use the prism of an 18^th century intellectual to affix the proper meaning to the word. In particular we know that such prism would filter out any notions of equality in the context of modern day social systems such as welfare or affirmative action.

A reasonable and arguably most credible interpretation of the founding fathers intended meaning of equality is one where the goal of equality is defined as one of opportunity and not necessarily of results (or outcome). This is fundamental, in that it underscores the principle of giving each individual an equal opportunity to improve his own state but does not mandate that the results of such efforts be held to the same standard of equality as for others. In fact, an argument can be made that enforcing equality of results is fundamentally unfair in that it unjustly rewards low performance and is eerily akin to Marx’s “from each according to his ability, to each according to his needs” formulation, which would not be written until 100 years later (1875, Critique of the Gotha Program). The distinction between opportunity and results equality was recently taken up and extensively discussed by British Business Secretary Peter Mandelson at the 2009 Fabian Conference at the Imperial College in London.

In our modern society we can observe countless examples of divergence from the principle of equality of results.

1. Affirmative action, previously mentioned, is perhaps the most glaring example of the up-side-down interpretation of equality, where results trump all other objectives – a starkly Marxist construct indeed
2. Progressive taxation, though widely accepted as fair and equitable, in fact is not ubiquitously fair as it creates disincentives to higher productivity and redistributes the output of the individual’s labor to those who have not contributed to its creation
3. Compensation pay grade systems such as within the government and many older companies, where rewards are defined within pay scale boundaries, regardless of the value of an individual’s contribution

A society which does not respect equality of its citizens is frail and cannot sustain itself indefinitely without the degeneration of its social fabric, inevitably leading to massive resentment of government and eventually social unrest. By misinterpreting our founders’ meaning of equality, we are at risk of steering our social policies toward the statist objectives of government welfare and control over our means and our lives. Our Constitution is a finely tuned and time proven instrument of democratic government with ideals interwoven such that in concert they support and amplify each other’s meaning and value. A misinterpretation or misapplication of one of these fundamental ideals not only diminishes its individual value, but also jeopardizes the document’s role as a compilation of our guiding values.

Next time you’re engaged in a discussion with someone who is justifying their position with arguments of equality, make sure to ask them: “What do you mean?”

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