OBAMASCARE: the New Health Insurance Law

OBAMASCARE: The New Health Insurance Law

What it Means for Markets, the Economy, and the American People

By Robert McHugh, Ph.D. March 27th, 2010

On Tuesday, March 23rd, a National Health Insurance Plan that affects every person in America has become law. An analysis of Obamascare is not a political statement. It is a necessary examination of the largest single spending bill in the history of any nation on earth, ever. It involves $1.0 trillion of spending, a half trillion of new taxes, and a half trillion of Medicare cuts. Of course it will have an impact on the economy, on markets, on the psyche of 300 million individuals in America and many millions of people outside the U.S. Technical analysis is a study of the collective psyche of all participants in all markets everywhere, which manifests itself in chart patterns, which is the language of the markets, telling us where prices are headed next. Fundamental economic analysis is the backdrop for our technical analysis, and this bill has huge fundamental economic and psychological impact. As this bill goes from conversation to reality, we will see the true contractionary power of what has just happened. The following is a summary of key points about the plan, and its impact on markets, and the economy, the American people.

The new National Health Insurance Law is a 2,074 page law with lots of surprises, lots of changes, lots of mandatory requirements on everyone. The Plan establishes a government run Health Insurance program that will compete with insurance plans from private companies such as Blue Cross. The government’s plan is called the “Public Option.” Many aspects of the law are designed to drive as many people as possible into the Public Option plan, presumably so the Central Planners can have more direct control over patients, doctors, and hospitals. It is referred to in the law as a New Public Options Health Insurance Exchange. People would have to pay insurance premiums to enter this plan. There are some low income tax credit subsidies to help defray the cost of health care to some people, but this is NOT Free Health Insurance, but rather is subsidized insurance for some people. Premiums have to be paid. It covers 35 million more Americans because by law they have to buy health insurance, not because it is free.

The law not only affects folks who opt for the National Insurance plan, but affects everyone regardless of what plan they choose. The law requires all U.S. Citizens and Legal Residents to have qualifying health coverage. There are exceptions for illegal immigrants, American Indians, economic hardship, prisoners, and religious objection. The fact that the public option is not free, and the fact that there is an economic hardship exemption, means that in effect, this law fails to ensure that the poor have health insurance, which was supposedly a key objective for a national health insurance plan. The poor do not necessarily get health insurance under this

1 new law. So what is the point of all the changes we are about to tell you for $1 trillion? We believe the point of this legislation is for the Central Planners to gain greater control over the lives and deaths of the American people.

The new law does not provide for a catastrophic health care option, where an individual could essentially self-insure the minor costs of health care such as doctor visits, dentist visits, eye doctor visits, and prescription drugs. Not that these are inexpensive health care costs, but in the overall scheme of what surgery, cancer treatment, heart treatment, and other major illness and injuries cost, they are minor. The law fails to offer a catastrophic only option, where an individual might pay Blue Cross $250 a month to cover the major medical costs, and the individual pays the minor costs. This option would have cut the cost of health insurance down significantly, allowing more folks to be insured without the need for a “Public Option,” government run insurance program or mandatory purchase requirements and fines on all Americans.

The plan also fails to provide a permanent requirement that all health insurers take on new customers with preexisting conditions. Blue Cross does not have to take a new customer if that customer is in the throes of a major illness. What the plan does do to address the issue of preexisting conditions is to provide a temporary national high risk pool to provide health insurance to individuals with preexisting conditions. In other words, if you have preexisting conditions, you are thrown into a government insurance program. Note this preexisting conditions component is “temporary.”

That is what the plan does as far as health insurance. But the plan goes much farther than this. The plan is in effect, an excuse to invade everyone’s privacy, to control people’s choices and lives, and to dictate salaries and compensation of medical doctors, and dictate how medical doctors personally spend their money. You won’t believe what we are about to show you. In essence, this law is a huge violation of the Bill of Rights and the Constitution. Of course those documents are not considered law anymore, having been overruled and reversed and interpreted by courts and lawmakers into an historic relic. There is going to be less freedom and less privacy, as you will soon see.

Let’s look at costs. The Congressional Budget Office estimates the cost of this new law will be about $1 trillion. This is coming at a time when our Federal Budget in 2010 is expected to rise four times, 400 percent, over 2009’s, and is 12 percent of GDP. Advocates for the new Health Attack Law (we are going to call it that because once everyone sees what is in this law, there is going to be a ton of distress that could detrimentally affect people’s mental, emotional, and/or physical health) claim that passage will reduce the budget deficit each year for the first ten years. This is cockamamie spin, complete manipulation of the facts, and is pure propaganda. They are failing to tell you that the expected reduction of the deficit in each of the first ten years will be $13 billion, which is less than 1 percent of the Federal Deficit for 2010, 0.8 percent. A pittance. And the reduction is coming from an increase in taxes to the tune of $438 billion, or about half a trillion, to partially fund national health insurance. Further, after the first ten years, the law is expected to cause a significant increase in the Federal Deficit as costs to maintain the program skyrocket. In other words, the law

2 puts the screws to our children. The remaining cost of the national insurance plan will be funded by a reduction in the cost (ie., services or quality of services) of Medicare, to the tune of $500 billion.

Let’s take a look at the coming tax increases from this new law:

Presently, individuals pay 1.45 percent in Medicare taxes on all wages, earned income, with no ceiling. That would stay the same if you make less than $200,000 as an individual, and less than $250,000 as a married filing joint family. If you make less than these levels, don’t get too giddy. They get you later. For those of you making above these levels, remember, the cost of living rise over the past few decades, drop the last zero, that’s what you make in your parent’s world. Inflation has pumped up the numbers, but the purchasing power of $200,000 is about what you could get for $20,000 thirty years ago. Maybe your parents made $20,000 back then. If so, were you rich as a child? Hardly.

If you make above those thresholds, your Medicare payroll tax is going to be raised to 2.35 percent from 1.45 percent.

More taxes: Further, this law will now add a new Medicare tax on unearned income, income from interest, dividends, and capital gains, if you make above $200,000 as an individual, and $250,000 as a married filing jointly couple, the new tax will be 3.8 percent. So, let’s say you have $100,000 of interest income, dividend income, and gains on sale of stocks. Your tax bill has now gone up an additional $3,800 a year. This provision is a big negative for the stock and bond markets. This is a disincentive to invest in stocks or bonds.

Here’s something very important to consider: 75 percent of all businesses report their income at the individual level, through schedule D’s or subchapter S corps, etc… This means that the increases in the Medicare taxes will be an added tax burden on small businesses, which will retard job generation in this country. This will increase unemployment as small businesses cut labor costs to offset the increase in their Medicare taxes. Remember, employers, small businesses included, must match Medicare payroll costs paid by their workers. So they are getting hit twice, as individuals, and as employers. This is a huge disincentive to hire workers.

More taxes: This law adds an excise tax (the law calls it a fee) on private Health Insurance companies who charge more than $27,500 for health insurance programs for families. While this may not seem like a big deal, how will those taxes be paid? They will be passed along to all customers of private insurance plans such as Blue Cross in the form of higher insurance premiums. In other words, if you are paying $13,000 a year for health insurance from a private carrier, that carrier may have to raise your premiums to $14,000 a year to cover the new 40 percent excise tax from the Health Attack Law.

More taxes: Individuals who refuse to buy health insurance (remember, this law requires everyone to get health insurance) must pay the greater of $325 or 2 Percent of annual income. Thus, if you are making $90,000 a year and refuse to get health

3 insurance, you now have an increase to your annual tax bill of $1,800.

More taxes: Employers with more than 50 workers who do not provide health insurance coverage must pay a $2,000 per worker penalty fee. This is clearly a disincentive to hire workers, a disincentive to expand small businesses. Small businesses generate half the jobs in our country. This is an incentive for a small business to not only let go of employees, but to merge out, sell their businesses, or shrink their businesses. This is a socialist economic move, because it will result in a reduction of aggregate supply. The key problem with socialist and communist economies is shortages. You can’t get what you want because of onerous restrictions and requirements by government on businesses.

More taxes: The Obama Health Attack Law raises the penalty on non-health withdrawals from tax advantaged health savings accounts to 20 percent.

More taxes: This law raises the threshold of medical expenses that must have been incurred for them to be a deduction on an individual’s tax return from 7 percent of adjusted gross income to 10 percent.

The Obama Health Attack Law goes far beyond the bounds of health care. It actually takes away many of our civil rights under the soon to be archaic Bill of Rights and Constitution. We will now explore some of these atrocities:

In section 2951, page 568, under the title, “Maternity, Infant, and Early Childhood Home Visiting Programs,” it creates a federal grant program to fund state home “visitation” programs. Under the terms of this program, government officials, including social workers, will be permitted to enter the homes of families “in order to promote improvements in maternal and prenatal health, infant health, child health and “development,” parenting related to child development outcomes, school readiness, and the socioeconomic status of such families, and reductions in child abuse, neglect and injuries.”

This allows the government to enter a home without a search warrant and tell parents how to raise their children, and force adoption of government child-rearing methods that are against the families’ cultural, deep ancestral traditions, intelligently and lovingly crafted personal choices, or religious beliefs. If families refuse the government visitation official’s directives, the officials may threaten families with abuse and neglect investigations.

The next batch of civil rights and democratic freedom violations contained within the Obama Health Attack Law comes from the research of a practicing physician, Dr. Stephen E. Frazer, M.D., who presented these atrocities to Senator Bayh of Indiana, which was printed in Indianapolis Star newspaper:

of the HC Bill: Mandates that the Govt will audit books of all employers that self-insure.

4 Page 30 Sec 123 of HC bill: THERE WILL BE A GOVT COMMITTEE that decides what treatments/benefits you get.

lines 4-16 in the HC bill: YOUR HEALTH CARE IS RATIONED.

of HC Bill: The Health Choices Commissioner will choose your HC benefits for you. You have no choice.

Section 152 in HC bill: HC will be provided to ALL non-US citizens, illegal or otherwise.

HC Bill: Govt will have real-time access to individuals' finances & a 'National ID Health card' will be issued.

HC Bill lines 21-24: Govt will have direct access to your bank accounts for elective funds transfer.

Sec 164: Is a payoff subsidized plan for retirees and their families in unions & community organizations: (ACORN).

Sec 203 HC bill: Govt mandates ALL benefit packages for private HC plans in the 'Exchange.'

Line 7 HC Bill: Specifications of Benefit Levels for Plans -- The Govt will ration your health care.

HC Bill Lines 8-18: The Govt will use groups (i.e. ACORN & Americorps to sign up individuals for Govt HC plan.

Line 7 HC Bill: Specifications of Benefit Levels for Plans. (AARP members - your health care WILL be rationed.) Page 102 Lines 12-18 HC Bill: Medicaid eligible individuals will be automatically enrolled in Medicaid. (No choice.)

4 lines 24-25 HC: No company can sue GOVT on price fixing. No "judicial review" against Govt monopoly.

Lines 1-16 HC Bill: Doctors/ American Medical Association - The Govt will tell YOU what salary you can make.

Line 15-17: An Employer MUST auto-enroll employees into public option plan. (NO choice!)

Lines 22-25: Employers MUST pay for HC for part-time employees AND their families. (Employees shouldn't get excited about this as employers will be forced to reduce its work force, benefits, and wages/salaries to cover such a huge expense.)

Lines 16-24: ANY Employer with payroll of $401,000 & above who does not provide public option will pay 8% tax on all payroll! (See the last comment in parenthesis.)

5 Page 150 Lines 9-13: A business with payroll between $251K & $401K who doesn't provide public option will pay 2-6% tax on all payroll.

Lines 18-23: ANY individual who doesn't have acceptable HC according to Govt will be taxed 2.5% of income.

Lines 1-3 HC Bill: Any NONRESIDENT Alien is exempt from individual taxes. (Americans will pay.)

HC Bill: Officers & employees of the GOVT HC Admin.. will have access to ALL Americans' finances and personal records.

Line 14-24 HC Bill: Govt will reduce physician services for Medicaid Seniors. (Low-income and the poor are affected.)

Line 6-8 HC Bill: Doctors: It doesn't matter what specialty you have trained yourself in -- you will all be paid the same! (Just TRY to tell me that's not Socialism!)

Line 10-18: The Govt sets the value of a doctor's time, profession, judgment, etc. (Literally-- the value of humans.)

Sec 1131: The Govt mandates and controls productivity for "private" HC industries.

Sec 1141: The federal Govt regulates the rental and purchase of power driven wheelchairs.

SEC. 1145: TREATMENT OF CERTAIN CANCER HOSPITALS - Cancer patients - welcome to rationing!

Sec 1151: The Govt will penalize hospitals for whatever the Govt deems preventable (i.e...re-admissions).

Lines 9-11: Doctors: If you treat a patient during initial admission that results in a re-admission -- the Govt will penalize you.

L 13-20: PROHIBITION on ownership/investment. (The Govt tells doctors what and how much they can own!)

318 lines 21-25, 1-3: PROHIBITION on expansion. (The Govt is mandating that hospitals cannot expand.) Page 321 2-13: Hospitals have the opportunity to apply for exception BUT community input is required.

Lines 3-9: The Govt has authority to disqualify Medicare Advance Plans, HMOs, etc. (Forcing people into the Govt plan)

Sec 1177: The Govt will RESTRICT enrollment of 'special needs people!' Unbelievable!

6 Page 379 Sec 1191: The Govt creates more bureaucracy via a "Tele-Health Advisory Committee." (Can you say HC by phone?)

Lines 4-12: The Govt mandates "Advance-Care Planning Consult." (Think senior citizens end-of-life patients.)

Lines 17-19: The Govt will instruct and consult regarding living wills, durable powers of attorney, etc. (And it's mandatory!)

Lines 22-25, 426 Lines 1-3: The Govt provides an "approved" list of end-of-life resources; guiding you in death. (Also called 'assisted suicide.') (Sounds like Soylent Green to me.)

Lines 15-24: The Govt mandates a program for orders on "end- of-life." (The Govt has a say in how your life ends!)

Lines 1-9: An "advanced-care planning consultant" will be used frequently as a patient's health deteriorates.

Lines 10-12: An "advanced care consultation" may include an ORDER for end-of-life plans. (AN ORDER TO DIE FROM THE GOVERNMENT?!?)

Lines 13-25: The GOVT will specify which doctors can write an end-of-life order.. (I wouldn't want to stand before God after getting paid for THAT job!)

Lines 11-15: The Govt will decide what level of treatment you will have at end-of-life! (Again -- no choice!)

McHugh’ s Comments:

While almost everyone agrees we need health care legislation, for elimination of preexisting conditions to be accepted in health insurance enrollment, to stop health insurers from dropping sick customers, and to assure affordable health insurance so everyone who wants health insurance can get it, the Obama Health Attack Law is dangerous.

This plan legislates a disincentive to buy stocks and bonds, and should retard market rallies, and could drive market prices lower.

This plan adds a half trillion in taxes at a time when the economy is fragile, and households need cash, need tax rebates, tax cuts, need family supporting jobs.

This plan legislates a disincentive to hire workers, or even keep existing workers, which should result in higher unemployment.

This plan legislates a disincentive for small businesses to expand, a disincentive to

7 produce more goods and services, which should result in a reduction of aggregate supply, creating domestic shortages, reducing exports, increasing imports, increasing prices (cost push inflation), and worsening the trade imbalance.

This plan legislates a disincentive for bright minds to go to medical school and become medical doctors, which could reduce the quality of health care for decades.

This plan takes away many of our constitutional rights, our civil rights, our freedoms and our privacy. It is a big brother law that is a product of totalitarianism, take your pick, either socialist fascist or communist. This is occurring at the same time the gang of five on the Supreme Court has ruled that an oligarchy of elite powerful corporate executives can spend any amount of money they want to affect the outcome of elections. Do you see what is happening? We are headed for dictatorship.

Ben Franklin: “We gave you a republic — if you can keep it.”

If I am a small businessperson, today I am doing some rethinking. Let’s say I own three auto body shops, and I am eking out $500,000 in profits from this business. Let’s say I employ 49 people. In other words, because I had the guts to take start up risks, put a lien on my personal home to borrow the money to buy a garage and office space, and equipment, because I had the energy and made the sacrifices in time away from my family, away from my kids’ soccer games, to spend 16 hours a day getting the business off the ground, now there are 49 people who are either the major breadwinner or provide supplemental income to their households, because of me. Let’s say in order to keep the business running profitably, I chose not to provide health insurance for my employees, which would have cost me about $12,000 per year per employee. If I had provided them with health insurance, that would have cost me $588,000. If I had provided that coverage, I would have lost $88,000 a year, had no income for my family, no money to pay off my facility and equipment loans, and would have gone bankrupt.

Now, as of March 23rd, 2010, I am facing a potential crisis in my business because of the Health Attack Act just passed by slightly more than half of Congress. My plans to expand my business to two more locations and hire 20 more people are in jeopardy. I know there are two nearby towns that desperately need auto body shops. I know that if I open these shops, the first year I will lose $50,000 per year in each shop, so my personal business profit will drop to $400,000, but it might be worth it because as customer traffic builds, by year three these two new shops are breaking even, and by year five they are contributing an additional $100,000 in profit for my small business. If I go through with my plans (before Obamascare was passed) I will employ 20 additional people with new jobs I created for them by opening these two new shops. I will be the proud employer of 70 hard working, good people, with families they can provide for thanks to me, and the blessing of God on my business.

However, as of Tuesday, March 23rd, 2010, everything has changed. If I open these two new shops and hire 20 more people, I now have to provide health insurance to 70 people, or else the Central Planners are going to charge me $80,000 in penalty taxes,

8 $2,000 per employee above 30 employees. So, I ask myself, can I afford to pay this penalty and expand? With the first year loss from the two shops, and the Obamascare penalty against me, I am looking at $180,000 in costs I did not have before the thought of expansion was on my mind. That would mean my business profit drops from $500,000 to $320,000. But Obama just raised my Medicare tax as well, so that further drops my profit. I cannot survive on $320,000 because I owe the bank money on the property and equipment loans. Plus, if I show a reduction in profits of nearly 35 percent in one year, the bank may call in my working capital and equipment loans, demand full repayment, and not renew my credit lines. Then I could be out of business, even forced into bankruptcy.

So, based upon all this, because of the new Health Attack Act, I am forced to abandon my plans for expansion of my business. Therefore, two nearby communities will not be getting auto body shops those towns could use, and 20 unemployed members of those two communities who would have been given meaningful paying jobs, will remain unemployed. Further, I am concerned about the rising costs of living, of running my existing 3 auto body shops. The reason I wanted to expand was because I noticed that the marginal profits on each of the three shops I own were shrinking the past three years, shrinking about 20 percent a year. I do not like the trend. Without being able to expand, I am worried about the future ability of my existing business to generate sufficient profits to make it all worth while. Therefore, I have decided to close down one of the three shops I have, consolidate the business into the two remaining shops, sell the buildings and equipment of that third shop, and layoff 25 workers. Further, I hope to run two remaining shops with just 25 people instead of 33. Maybe they will work harder and smarter under fear of being laid off, out of fear of having another shop close down. I’ll be asking each person to work the job of 1.25 people. I don’t want to do this to them, but have little choice.

If I get too much grief from the remaining 25 employees from the remaining two shops, that I am asking too much of them, I will just close the business down altogether, lay them all off, and apply for a new government job as a Home Visitation Official, telling parents how to raise their children, and threatening them with an abuse and neglect investigation if they do not obey me.

In the above scenario, what has just happened? What has happened is 45 jobs were lost. In the above scenario, income tax revenues for the U.S. Treasury fell, and in the above scenario there is an increasing shortage of auto body shops in this community. Multiply this by 500,000 businesses across our country. The cost is millions of jobs. Potentially tens of millions of jobs.

Today, all across America, a business analysis similar to what this auto body shop owner conducted, is either going on, or is being scheduled with accountants and financial advisors to be conducted ASAP. Every small business in America, with any intention of expanding, or which employs more than 49 workers, is conducting a business going-concern study that they would not have had to consider before march 23rd, 2010, a day that will live in infamy. Over half the new jobs in America

9 are created by small business. That will change.

Again, a lot of people do not understand that this Health Attack Act is NOT free National Health Insurance. It covers 32 million more Americans because it mandates, orders, 32 million people who do not have health insurance to buy it.

We are hearing how the New Health Attack Law will benefit small businesses because it provides tax credits to small businesses. This is a completely misleading claim. Will there be a very small contingent of small businesses that can get tax credits to defray part of an increase in their health care benefits expense? Yes. But the credit only affects a few businesses, due to restrictions in the law, and only applies if a business spends a greater amount than the credit on insuring that small business’s workers, which makes no economic sense, and is not likely to happen. Thus the credit is a sham.

Here is how it works: First of all, only small businesses with less than 10 employees qualify for a small business health care tax credit. So that eliminates a ton of small businesses. Then, a small business only qualifies for a tax credit if the average salary of all those fewer-than-10 employees are paid less than $25,000. What small business operates with less than 10 people, with an average annual wage less than $25,000? McDonald’s hamburgers? No. They have more than 10 workers, even if we are talking about a one store franchise. Would a Doctor’s office qualify? No. Medical technicians make more than $25,000. How about a hair salon? Iffy. Probably not. How about a car dealership? Nope. Average salary is over $25,000 and probably more than 9 employees. How about a day care center? Maybe. Yes. That might work. Let’s study this scenario, now that we have found a potential small business that qualifies for the hyped deceptive “small business tax credit.”

Let’s say the Day Care Center employs 6 people. Let’s say 5 of them earn $6.00 an hour and work 2000 hours a year. Okay. That is an average wage of $12,000 a year for 5 people, and the manager owner may earn $30,000. So looks like this business qualifies. Now. What does this small business have to do to get the Obama small business tax credit? First of all, to get the credit, this small business has to provide employer full or partial payments toward their employees’ health insurance. But, in all likelihood, this employer is not providing any health care insurance premium assistance. Therefore, the Day Care Center has to take on a new expense for health care insurance for their employees. Then, Obama will give the Day Care Center half, 50 percent, of the cost of what they pay in health care premiums for their employees. Duh. There is no incentive for this Day Care Center to start paying health insurance premiums for their 6 employees, because whatever they get back in tax credits from Obama will be half the new incremental additional cost to the business.

Leslie Kwoh of The Star-Ledger quoted New Jersey Chamber of Commerce’s analysis of this tax credit in her article Small Business Owner React to Health Care Reform, posted

10 at www.everythingjersey.com . Their take is that of all the members, most do not qualify because the average salary being paid by members is $27,000.

Here is something else to consider. If you run a small business, and have more than 49 employees, you must either provide health insurance for them or pay a $2,000 fine per year per worker. But get this: Part-timers count. Part-time workers count in the calculation of the fine this law is going to assess against you. The formula is, two part- time workers equal one full-time worker. So, if you run a store with 30 full time workers, and 100 part-term employees, and do not provide health insurance for all of them, you will be fined $100,000 a year (100 part-term workers divided by 2 equals equivalency workers for Central Planner fining purposes. That result, which is 50, times $2,000 equals a total new expense for your business of $100,000). The alternative is to provide health insurance for all 100 part-timers, which would cost you about $600,000 in fresh expenses a year. This is a lose lose lose. You will layoff workers to make up for the fines you will now be paying, increasing unemployment in our nation.

Here is a fact most folks don’t realize: Did you know that 83 percent of all Americans have Health Insurance coverage? Yep. The new Obama Health Care Law will spend $1.0 trillion to order Americans to buy health care insurance to get the percentage up from 83 percent to 95 percent. Under Obamacare, at the most optimistic estimates, at the end of the day, there will still be 5 percent of Americans who do not have Health Care insurance.

So far, we have been examining the facts and truth about the new Health Attack Law, analyzing it in terms of its impact on markets, the economy, and the lives of Americans, ie., freedom and civil rights. We think this particular law has largely failed America, while being misunderstood and touted as terrific by mainstream pundits.

The National Health Attack Act will have an unintended consequence of causing millions, probably tens of millions in job losses (both existing and what would have been created otherwise by small businesses), which will drive unemployment to the highest levels ever in the history of our nation. Next we want to examine the inflation impact of Obamascare. There are two key ways to get a jolt of higher inflation. Both occur because we find too many dollars chasing too few goods. The first cause of inflation, is if the Federal Reserve, or the credit function in the financial system, create too much money, grow money at a faster rate than the growth rate in the supply of goods and services. That is what the Fed, Master Planners, and Central Planners have been doing for the past decade to prevent recession, to goose markets, and to fight recession. This policy has resulted in the decline of the Dollar’s value, the debasement of the Dollar’s purchasing power, and a dramatic rise in the cost of living. Easy money allowed Housing prices to bubble, stock markets to bubble, health care (16 percent of GDP) to bubble, etc…

There is a second way inflation strikes. This one is more painful, as market values do not follow the inflationary trend. It is called cost push inflation in Econ 101 classes. Here, businesses producing a finite number of goods and services are forced to raise

11 prices to maintain acceptable marginal revenues, to retain acceptable profitability to stay in business. In other words, it is a defensive move by businesses to pass along the higher costs of production onto their customers in the form of higher prices. Costs can be labor, materials, or overhead. Obamascare will raise the labor component of production dramatically. We have already studied and seen this is true in the past two newsletters. Businesses will attempt to pass along the higher costs of being mandated to provide health insurance to previously non-covered employees or pay penalties, to consumers in the form of higher prices for their goods and services. If their product is discretionary, if their pricing power is inelastic, if they sell something folks can do without, choose to do without, those businesses will go out of business. If businesses sell a non-discretionary product, an inelastic product, a necessity or essential, they will probably be successful in sticking higher prices to the consumer.

If businesses are successful in passing along higher health care benefits costs to consumers, then consumers will find they have less discretionary money to spend, and consumer spending in the aggregate, all across the country, will decline, which will reduce corporate earnings, will reduce GDP, will reduce tax revenues, and reduce living standards. Those businesses that close up shop, go out of business, who could not pass along onerous labor cost increases, will contribute to a rising unemployment crisis, and declining aggregate supply, ie., rising shortages of goods and services.

Obamascare is pure socialist economics. It shrinks the economic pie for everyone. Yes, a few more folks may be able to get health insurance, but there will be growing ranks of the poor because of more unemployment. So are the uninsured better off if they cannot get a job?

All of the above, of course, will eventually find itself manifested in a plunging stock market, as corporate earnings plunge, and the recession becomes a depression. The big picture charts of worldwide stock markets see this. We’ve been showing the huge Bearish patterns in our weekend newsletters for months at www.technicalindicatorindex.com . They are suggesting bad stuff is coming, such as the National Health Attack Law, that are destructive for economies and markets.

The worst standards of living in the 20th century were in countries who followed socialist or communist economic policies; Russia, Poland, East Germany, China. That is why they moved toward capitalism toward the end of the 20th century. Because America’s capitalist economy had it right. But now we see a major step in the direction of socialist economics in America. For this, we will pay a great price.

At least 13 States are about to file a lawsuit against the new Health Attack Law, claiming it is unconstitutional. They will be arguing that it is unconstitutional for the Federal Government to order individuals to buy anything, including health insurance, as this law mandates. Further, they will argue that it is unconstitutional for Congress to fine or tax someone just for living (if they do not purchase health insurance). They will also argue that the new law infringes on each state’s

12 sovereignty. The Health Attack Act shifts billions of dollars of costs for Medicaid upon the states, placing at risk a state’s ability to provide education, prison incarceration, foster care, and other essential services benefits to residents. The Federal Law, it will be further argued, is forcing states to implement programs they cannot afford. They will argue the National Health Attack Act violates Articles I and XX of the U.S. Constitution.

The thirteen states joining the lawsuit so far are Alabama, Florida, Idaho, Louisiana, Nebraska, North Dakota, Pennsylvania, South Carolina, South Dakota Texas, Utah, Virginia, and Washington.

So, in summary, as far as the impact on inflation, we believe Obamascare will increase inflation on a shrinking supply of goods in an economic environment of rising unemployment. This is dangerous, and puts us squarely on the path to destruction, to the next Great Depression.

Former Labor Secretary, and Democrat, Robert Reich, had some very interesting comments about the fundamentals of the economy, and how the truth about those fundamentals is not being told to the American public. He had this to say before Obamscare was passed:

“The “recovery” is a sham. Part of the perceived growth in GDP is due to rising government expenditures," he says. “But this is smoke and mirrors. The stimulus is reaching its peak and will be smaller in months to come.” Reich recently wrote in The Huffington Post. “And a bigger federal debt eventually has to be repaid. And even though the U.S. economy grew at a 5.9 percent annual rate in the fourth quarter of 2009, those GDP figures are badly distorted by structural changes in the economy. For example, part of the increase is due to rising healthcare costs. When WellPoint ratchets up premiums, that enlarges the GDP. But you can’t consider this evidence of a recovery. Big global companies, Wall Street, and high-income Americans who hold their savings in financial instruments are clearly doing better,” Reich notes. “As to the rest of us — small businesses along Main Streets, and middle and lower-income Americans — forget it,” he says. “Business cheerleaders naturally want to emphasize the positive,” Reich points out, “because they assume the economy runs on optimism and that if average consumers think the economy is getting better, they'll empty their wallets more readily and the economy will expand faster. The cheerleaders fail to understand that regardless of how people feel, they won't spend if they don't have the money,” Reich says.

McHugh Comment: And now the situation is ten times worse.