In 2003, the White House Office of Management and Budget estimated that the Iraq War would have a total cost of $50 to $60 billion. So far, we have already spent $713 billion on the Iraq War (over 1,000% more than what was projected).

The Congressional Budget Office is estimating that the healthcare bill will cost $940 billion over the next 10 years, but if history is any indication, the actual cost will likely be several trillion dollars. NIA believes the healthcare bill will be the final nail in the coffin of the U.S. economy and will just about guarantee that we will see hyperinflation by the year 2015.

The U.S. government last week reported a record monthly budget deficit for February 2010 of $220.9 billion. Total tax receipts for the month were only $107.5 billion compared to outlays of $328.4 billion. The total U.S. deficit for the first five months of fiscal year 2010 was $651.6 billion, with tax receipts of $800.5 billion and outlays of $1.45 trillion. The deficit was up 10.5% for the first five months of fiscal year 2010 over the same period in fiscal year 2009.

We are now at a point where if the U.S. government taxed Americans 100% of their income, the tax receipts generated would not be enough to balance the budget. Likewise, if the U.S. government cut 100% of its spending including defense, but kept paying Social Security, Medicare and Medicaid, we would still have a budget deficit. NIA believes it will be impossible for the U.S. to have a balanced budget ever again.

The U.S. national debt is now $12.67 trillion of which $8.061 trillion is public debt. Due to the Federal Reserve's artificially low interest rates of 0% to 0.25%, interest payments on our national debt last month were only $16.9 billion, an interest rate of only 2.548% on our public debt. The reason for the spread between our 2.548% interest rate on the public debt and the federal funds rate of 0 to 0.25% is that a portion of our national debt is made up of long-term bonds at higher interest rates.

Our debt ceiling was recently raised to $14.3 trillion, which we are on track to reach in less than a year, sending our public debt up to about $10 trillion. If the Federal Reserve raises the federal funds rate up to just 2% during the next year, NIA believes the interest rate on our public debt could rise to 5% and our annual interest payments will likely rise to $500 billion or 23% of projected 2010 tax receipts of $2.165 trillion.

The White House is not projecting for interest payments on the national debt to break the $500 billion mark until fiscal year 2014. By then, even if we go by White House projections that the deficit will be cut to $828 billion in 2012, $727 billion in 2013 and $706 billion in 2014, in 2014 we will still be looking at a national debt of over $18.5 trillion with a public portion of around $13.14 trillion. We find it shocking that the White House is projecting an interest rate on our public debt in 2014 of only around 4%.

All of this means that the While House expects the Federal Reserve to leave interest rates at artificially low levels almost indefinitely. However, we know it will be impossible for them to do so without creating a huge outbreak of inflation in the prices of food, energy, clothing, and just about everything else Americans need to live and survive. In order to prevent hyperinflation, we need interest rates to be higher than the rate of inflation.

NIA believes the real rate of U.S. inflation to already be approximately 5%. If the Federal Reserve doesn't raise the federal funds rate to above 5% in the short-term, in our opinion, an outbreak of double-digit inflation is inevitable. By 2014, it is possible the Federal Reserve will be forced to raise the federal funds rate up to above 10% and the public portion of our national debt could exceed $15 trillion. Therefore, in 2014 we could see the interest payments on our national debt reach $1.5 trillion, about triple what is currently being projected and 43% of the government's projected tax receipts that year of $3.455 trillion.

Besides the cost of the healthcare bill and rising interest payments on our national debt, another major catalyst for hyperinflation will be social security payments, which adjust to the CPI-index. As the government's CPI-index rises, so will the social security payments that it owes. This could cause a death-spiral in the U.S. dollar. Inflation is still the last thing on the minds of most Americans, but soon it will be their primary concern.

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It all looks very kind, and it has worked before, sortof. Countries have been saved from the humiliation of bankruptcy by the International Monetary Fund, and now the European Union is contemplating creating a similar "European Monetary Fund" to finance similar bailouts of countries that cannot live up to their debt obligations. This is going to fail, utterly. The question is: How bad will it be?

Saving Greece

The situation in Greece is an acute problem. Bankers and politicians are trying to talk it down, but the facts on the ground are hard:

Greece needs to renew a significant (€ 20 billion) amount of debt that mature in April, May 2010.

That is done by selling off sovereign bonds (bonds issued by a nation, not a corporation) on auctions, where the highest bidder for each lots determines the effective rates this debt will carry. If bidders are reluctant, interest rates will be high relative to the amount of money taken in. Thus, Greece needs friends to talk up its position ahead of the auctions. This is precisely what happens:

Prime Minister of Luxembourg, Jean-Claude Juncker, states that Greek support is likely to be bilateral loans.

Hold on to that for one minute: 'Bilateral' means country-to-country, for the obvious reason that banks are no longer willing to take on more risk in Greece. Clear enough: If Greece is too risky for commercial lending, the friends in other states will be willing to help out. This, unfortunately, creates more problems than it solves:

1. It's not their own money. Banks, investment funds etc. are risking money that are either their own or that of their clients. Politicians use money of the taxpayers, which cannot be withdrawn.
2. The countries have no money. All major eurozone countries are deep in debt already, and sinking. There is nothing they can lend to Greece, except by taking on more debt themselves.
3. Moral hazard will be created by any bailout. While not directly measureable, other countries like Italy and Spain will relax, increasing the risk that further bailout will be needed.
4. It insults productive citizens. While Germans are used to being blasted for working hard and creating value, using their surplus to bail out the lazier Greeks is an insult to productive behaviour.
5. This is extreme risk. Governments worldwide blasted commercial banks for excessive risk-taking leading to the 2008 crisis. How can it be that governments are now willing to take risks that banks refuse to touch?

Money-printing in spades
(Readers not interested in technicalities could skip this section)
Issues (2) and (5) above are related. There is one common reason that governments can lend money without having saved any, and that they are able to take on even more risk than they blame the commercial banks for taking: Money-printing at the ECB. It was pointed out by a few years ago that the ECB through its 'unconventional' measures simply prints money:

The ECB is effectively the money market now," said Dario Perkins, senior European economist at ABN Amro in London. "Banks can get as much money as they need from the ECB so that in itself isn't the problem. In theory it can do that as long as necessary.

 

Further, while the ECB thoughens collateral requirements for other banks, it slackens those for itself. Since the ECB issues money itself, that translates into: "Dear member states: Don't bother borrowing second-hand money from elsewhere, get them freshly printed from us."

The mechanism is simple: If a state has a credit rating by international agencies in the 'A' range, the ECB will provide loans with sovereign bonds from that state as collateral, effectively monetizing government debt. This has been tried before, like in Weimar Germany (full book), usually leading to disasterous results. The idea of depositing bonds as 'collateral' in the central banks indicates a willingness to later pay back the money 'borrowed', thus eliminating it from the markets at some later point in time. That, unfortuantely, doesn't happen too often.

The ECB doesn't make risk assessments itself. It relies on rating agencies, and if those agencies approve the creditworthiness of a particular country, ECB monetizes its debt, no questions asked. Since the money from ECB is printed, not earned, there is theoretically no limit to this, and Greece has richly taken advantage of the opportunity, for instance to make a pension age of 55 possible.

Now Greece is in trouble due to reckless borrowing, and in a free markets, investors would flee. Greece is the vanguard of reckless borrowing, but other eurozone countries are not far behind, making for a cumulative debt burden at around 88 % of the eurozone GDP. That's a lot of money, and no plan for repayment is in sight.

This causes a steady growth in the euro money supply. The core money supply (M1) of euro is rising at roughly 12 percent on an annual basis (data can be found at ECB). The wider money supply (M3) is stagnant, which fits with the fact that consumer prices are stable at the moment. The significantly higher M1 growth sets the state for inflation to hit us in the future.

The total amount of government debt in the eurozone is € 5,418 billion as of January, 2010. This has been growing at the rate of € 30 billion a month.

What I have not been able to find a direct source for is the crucial question: How much of this is monetized by the ECB?. The data is out there somewhere, and Anatole Kaletsky in his classic article How the ECB's fig leaf has completely withered away quotes figures of $ 1.5 trillion, roughly € 1.000 billion, but provides no direct source for his data. He says of the situation:

In effect, therefore, the ECB has been lending money by the shed-load to governments, with commercial banks acting merely as a fig leaf for what would otherwise be seen as a blatant monetisation of the most insolvent European countries' public debt.

 

An exercise for the reader:
Finding hard data on how much government debt the ECB holds. This is a sincere request. An answer will be most appreciated.

Back to Greece
Technicalities aside, what happens right now is that Greece needs a solution, and needs it fast. It is rather unclear what the eurozone governments have in store for Greece, split between the desire to help their friends in Athens and the unwillingness of their own citizens to pay for it. A typical quote from Jean-Claude Juncker in EUobserver:

"What will happen if necessary, and we're still convinced it won't be necessary, is that we'll reach an agreement in the eurozone to offer bilateral support in a co-ordinated form," he told journalists late on Monday evening, adding that the Greek authorities have not yet asked for financial support.

 

Clear statements are not the habit of these people. What he says here will be heard by more than one audience:

• The Greek government and public, strongly desiring a hard promise of a rescue.
• Investors, who will look for signs that determine the risk of Greek debt.
• Ordinary citizens, who widely resist sending money to Greece when they themselves have trouble making ends meet.

These objectives are mutually contradictory, thus the mealy-mouthed statement. Further unclarity:

The group's wariness in providing greater details or definitively signing off on a bail-out mechanism is symptomatic of domestic constraints and concerns over sending the wrong message to financial markets, say observers.

 

'Domestic constraints' is an euphemism for several problems, the most significant being that governments have no money to lend, and that taxpayers are not in a mood to pay for fixing Greek problems.

All told, Greece is stuck between a rock and a hard place. It has no clear plan for paying back its debt - none at all - only to cut deficits to a still hefty 8 percent of GDP. Strikes and riots have been rampant in Greece, there is little chance that the government will tighten up more than absolutely necessary. While the EUROGENDFOR could in priciple be deployed against rioters, that would effectively turn the European Union into a police state. That seems an unlikely development, a greater money supply is more likely. Thus:

Enter the EMF
A proposed solution to the Greek problem, as well as to funding future bailouts of bankrupt states, is the EMF. German Finance Minister Wolfgang Schäuble says that details will be revealed 'soon', and that it will be as powerful as the IMF.

Where would that power come from?

Now, such organisations are usually not planned in ways open to the public. Details are scarce, for knowledge of such details could be profitable to investors and 'speculators', who look for market signs in order to make the best of their money, a trade frequently frowned upon by politicians.

One idea is that it would take our gold, as the German goverment is said to have suggested. By having solid assets taken from the national banks of the participating states, it would have a solid grounding for its bailout business and would not need to resort to the SDR money-printing tactics of the IMF. The German Central Bank, however, resists having its 3,407 tonnes of gold used for this purpose. As the bank ('Buba') in principle is independent from the German government, this could turn into an interesting power struggle.

A common notion is that an EMF should stop the Greek fires spreading, which implicitly lays the whole of the blame on Greece, as if the crisis was some sort of disease that can either be contained in Greece or run amok elsewhere. This is of course not the case - the Greek problems are caused by Greek deficits, problems in other countries are caused by their own deficits, not by the Greek mess.

The negotiations regarding an EMF are clandestine by necessity. If they were open to public scrutiny before an agreement is reached, economists and journalists would analyze each proposal and point out how every single funding model possible would somehow harm hard-working, productive people and companies. Such debates would kill of the idea in its infancy, a risk that EU leaders do not want to take. The EMF probably will be created, and the funding model will likely be inflationary, as this is the most diffuse way to bring about the means needed for its operation.

Now, when introducing the common European currency was planned during the Maastricht Treaty process, a clear promise (not least to the Germans) was: "No bailouts!". That is actually written into the treaty, and any acute bailout of Greece would have to dodge that rule. That is probably a main reason that 'bilateral, coordinate' solutions are found. If this was done formally as a common action, citizens might bring a court case for treaty violations, which would be unpleasent for the EU. Dodging the rules through bilateralism is much more workable.

On a similar note, creation of an EMF would require changes to the Maastrict Treaty, and since an EMF would aquire some of the sovereignty usually held by the member states, at least an Irish referendum would be needed, and possibly several others, like in Denmark. That is another source of fear for the EU leaders, and the mere prospect of this just might kill off the EMF in its infancy.

"Trust us, we know what we're doing"
What noone taking part in these negotiations seem to understand, is that any bailout of Greece would lead to the full and irrecoverable demise of the euro. The cause would be simple: Death by moral hazard.

Any bailout would save Greece the humiliating agony of a real bankruptcy, which would indeed have dire consequences, not least for Greek pensioners as well as for all public services. Greece could be forced to become a minimalist state in a very short time, unruly and messy, with lots of suffering to follow.

But that might not be the worst of options. Noone wants these problems for the Greek, they have brought it upon themselves by means of extravagant spending for years, aggravated by the dubious methods Greece applied

Doing so would constitute a clear statement, and not only to Greece. Italy, Spain, Portugal and others would take heed, and with the example of Greece in hand be in a much better position to rein in public deficits. Which they will have to do eventually anyway, for no economy can live with endless deficits and ever-mounting debts.

On the other hand, bailing out Greece and continuing the ECB policy of printing money to lend, would set European leaders in a position where they cannot deny future requests for help, as doing so would trigger a reaction in the tone of: "But you helped Greece! What are you guys, racists or what??"

The endgame for the euro
This mess will likely end with the demise of the euro, in an avalance of uncontrollable inflation. Before that, we will see more emergency measures, more bailouts, and more business failures. Rampant unemployment, rapidly rising government debt, as well as extensive riots. If the European Union and the ECB wants to save the euro as the strong currency it was supposed to be, this is the last chance:

Don't help the undeserving Greeks!

As it stands now, however, it looks like our inept politicians will rather save their Greek friends than save the euro.

March 19, 2010 -

Governor C.L. Otter is the first state chief executive to sign such a measure in response to the impending  takeover of our health care system by the Obamunists.

The Idaho response expresses outrage at ObamaCare's provision of requiring all Americans to purchase health insurance. This is considered an illegitimate mandate that will impact every state in the union.

The Idaho measure says the citizens of Idaho won't be subject to this government mandate and refuse to turn another part of their lives over to the central government in Washington.

The Attorney General of Virginia, Kenneth Cuccinelli has also warned Speaker Pelosi against ramming through ObamaCare without a direct vote on the legislation.

The Virginia General Assembly has voted to ban any federal mandates on purchasing insurance.

Currently, Speaker Pelosi is working with House Rules Committee Chairwoman Rep. Louise Slaughter (D-NY) to impose nationalized health care on all Americans without even voting on the bill. Her gimmick is to "deem" the Senate bill passed instead of a full vote in the House.

There are at least 34 states planning on rejecting ObamaCare health insurance mandates, according to the American Legislative Exchange Council (ALEC).

In addition, the Landmark Legal Foundation is preparing a lawsuit against the unconstitutionality of ObamaCare if it is signed into law.

Landmark President Mark Levin has noted: "Landmark has already prepared a lawsuit that will be filed in federal court the moment the House acts. Such a brazen violation of the core functions of Congress simply cannot be ignored. Article I, Section 7 of the Constitution is clear respecting the manner in which a bill becomes law. Members are required to vote on this bill, not claim they did when they didn't. The Speaker of the House and her lieutenants are temporary custodians of congressional authority. They are not empowered to do permanent violence to our Constitution."

"The passage of ObamaCare will be a political disaster for the Democrats in November," said TVC Executive Director Andrea Lafferty. "The legislation will eventually be overturned as unconstitutional, but come November, ObamaCare will become Obamacide for Democrats. They will have managed to bungle health care reform - and will effectively fire  themselves in the upcoming election."

TAKE ACTION: ObamaCare must be defeated. Let your Senators and Representatives know you oppose any nationalized health care plan!

Additional Resources:
House Posts 2,309-Page 'Shell' Bill On Sunday Night
Liberals Plot New Scheme To Ram Socialist Medicine Through
Democrats Mislead on Health Care 'Reconciliation'

The rule of law, in the classical sense of the expression, cannot be maintained without actually securing the certainty of the law, conceived as the possibility of long-run planning on the part of individuals in regard to their behavior in private life and business. Moreover, we cannot base the rule of law on legislation unless we have recourse to such drastic and almost absurd provisions as those contrived by the Athenians at the time of the nomotetai.

Typical of our times is the tendency to increase the powers that officials in the countries of the West have acquired and are still acquiring every day over their fellow citizens, notwithstanding the fact that these powers are usually supposed to be limited by legislation.

[1] A contemporary author, E. N. Gladden, summarizes this situation as a dilemma, which he formulates in the title of his book, Bureaucracy or Civil Service. Bureaucrats enter the scene as soon as civil servants seem to be above the law of the land regardless of the nature of that law. There are cases in which officials deliberately substitute their own will for the provisions of the law in the belief that they are improving on the law and achieving, in some way not stated in the law, the very ends they think the law was intended to achieve. There is often no doubt about the good will and the sincerity of the officials in these cases.

Permit me to cite an example taken from certain bureaucratic practices in my own country at the present time. We have legal regulations concerning vehicular traffic. These provide for a number of penalties for offenses committed by drivers of vehicles. The penalties are usually fines, although in exceptional cases those contravening the rules may be tried and put into prison. Moreover, in certain cases especially provided for by other legal regulations, offenders may be deprived of their driving licenses if, for instance, their offenses against the traffic regulations cause personal injuries or grave damages to others or if they drive while drunk.

As motor vehicle traffic of all kinds is constantly increasing in my country, accidents are becoming more and more frequent. The authorities are convinced that stricter discipline imposed on the drivers by the enforcement officers themselves is the best means, even though not a panacea, to reduce the number of traffic casualties all over the territory they control. Members of the executive, such as the minister of the interior and other state officials depending on his direction, the "prefects," the agents of the national police all over the country, the officers of the local police in the towns, and so on all down the line, try to apply this theory in dealing with offenses against traffic regulations.

But some of them often do even more. They appear to be convinced that the law of the land in this connection (namely, the legal regulations concerning the penalties to be imposed by the judges on the offenders and the procedure to be followed for that purpose) is too mild and too slow to meet successfully the new exigencies of modern traffic conditions. Some officials in my country try to "improve" on the existing procedure to be followed in accordance with the law of the land in these respects.

One of the officials explained all this to me when I tried to intervene on behalf of some clients of mine against what I considered an illegal practice on the part of the authorities. A man was reported by the police as having passed a vehicle in violation of the traffic regulations. Immediately and unexpectedly he was deprived of his driving license by the "prefect." As a result, he could no longer drive his truck, which meant that he was practically without a job until the authorities consented to return his license.

According to our written regulations, the "prefect" may deprive an offender of his driving license in a number of cases, but passing another vehicle against the traffic regulations and without causing any casualties is not one of them. When I brought this fact to the attention of the official concerned, he agreed with me that perhaps, according to a correct interpretation of the present rules, my client had not actually committed an offense punishable by depriving him of his license. The official also politely explained to me that, in several other cases, maybe in seventy percent of the cases, offenders were now being deprived of their driving licenses by the authorities without having actually committed an offense that deserved such a punishment according to the law.

"But you see," he said, "if we do not do this, people in this country (sometimes officials seem to consider themselves natives of other countries) will not be sufficiently cautious, for they do not give a damn about penalties of a few thousand lire such as are imposed by our law. On the other hand, if you deprive them of their license for a while, offenders feel the loss more keenly and will be much more cautious in the future."

He also said, rather in a philosophical vein, that he thought the injustice done to a comparatively small number of citizens could be justified by the general result obtainable, according to the opinion of the authorities, in improving the movement of vehicular traffic in the public interest.

An even more striking example in this connection was related to me by a colleague. He had gone to protest against the issuance by a district attorney of an order of imprisonment against a driver who had run over and killed somebody in the street. According to our law, casual homicides may be punished with prison sentences. On the other hand, district attorneys are entitled to issue orders of imprisonment before the trial only in special cases prescribed by the rules of our criminal procedure whenever they consider that imprisonment may be advisable under the circumstances.

It should be obvious that imprisonment before trial is not a punishment, but a security measure designed to prevent, for instance, the possibility that a man who has been accused of committing a crime may escape before being tried or even that he may commit other crimes in the meantime. As this was obviously not true in the case of the above-mentioned man, my colleague asked the district attorney why he had issued an order of imprisonment under the circumstances.

The reply of the district attorney was that in view of the increasing number of motor vehicle casualties it was legitimate and proper on his part to try to prevent offenders from causing further inconveniences by putting them into prison. Besides, ordinary judges are usually not very severe against people indicted for casual homicides; hence a little taste of prison before trial would be a salutary experience for offenders anyway. The official concerned candidly admitted that he was behaving this way in order to "improve" on the law, and he felt perfectly justified in employing means like imprisonment even though it was not properly prescribed by the law for that purpose, in order to achieve the desired end of reducing traffic casualties.

This is a typical case of the attitude of officials who substitute themselves for the law by so stretching the letter of the statute as to apply rules of their own under the pretext that the law would be insufficient if more scrupulously interpreted and applied to achieve its ends in a given circumstance. Incidentally, this is also a case of illegal behavior, that is, of behavior on the part of public officials in contravention of the law, and is not to be confused with arbitrary behavior, such as that eventually allowed to British officials at the present time in view of the lack of a definite set of administrative rules.

As a good example of arbitrary behavior on the part of the British administration, one could probably cite the famous and rather complicated case of Crichel Down, which aroused so many strong protests in England some years ago. State officials who had legally requisitioned private property during the war in order to use it as a bombing range tried to dispose of the same property after the war for completely different purposes, such as conducting agricultural experiments and the like.

In cases of this kind, the existence of certain regulations, in the sense of precisely worded, written statutes, can be very useful, if not always in preventing officials from violating the law, at least in holding them legally responsible for their behavior before ordinary courts or before administrative tribunals such as the French conseil d'etat.

But to move on to the important point of my argument: Individual freedom in all countries of the West has been gradually reduced in the last hundred years not only, or not chiefly, because of encroachments and usurpations on the part of officials acting against the law, but also because of the fact that the law, namely, the statutory law, entitled officials to behave in ways that, according to the previous law, would have been judged as usurpations of power and encroachments upon the individual freedom of the citizens.[2]

This is patently demonstrated, for example, by the history of the so-called English administrative law, which may be summed up as a succession of statutory delegations of legislative and judiciary powers to executive officials. The fate of individual freedom in the West chiefly depends on this "administrative" process. But we must not forget that the process itself, without considering cases of sheer usurpation (which are probably not so important or so numerous as we may imagine), has been rendered possible by legislation.

"Socialism and legislation seem to be inevitably connected if socialist societies are to keep alive."

I quite agree with some contemporary scholars, such as Professor Hayek, who are suspicious of executive officials, but I think that people who praise individual freedom ought to be even more suspicious of the legislators, as it is precisely through legislation that the increase in the powers (including the "sweeping powers") of officials has been and still is being achieved. Judges too may have contributed, at least in a negative way, to this result in recent times.

We are told by so eminent a scholar as Sir Carleton Kemp Allen that the courts of judicature in England might have entered into a contest with the executive, as they were disposed to do in former ages, in order to assert and even to extend their authority in connection with an altered conception of the relationship between the individual and the state. In recent years, however, according to Sir Carleton, they have done "precisely the opposite," as they have increasingly "tended to keep their hands off the 'purely administrative' and to refrain from any interference with executive policy."

On the other hand, so distinguished a magistrate as Sir Alfred Denning, one of the present Lords of Her Majesty's Court of Appeal in England, in his book, The Changing Law, first published in 1953, gives us a convincing account of several actions on the part of British courts in recent years designed to maintain the rule of law by keeping under ordinary judiciary control the government departments (particularly after the Crown Proceedings Act of 1947) or such odd entities as nationalized industries, departmental tribunals (against one of which the Court of the King's Bench issued a writ of certiorari in the famous Northumberland case in 1951), private tribunals (like those set up by the rules of such organizations as trade unions), and so on. It is difficult to decide whether Sir Carleton is right in charging the ordinary courts with indifference toward the new powers of the executive or whether Sir Alfred Denning is right in pointing out their activity in the same respect.

A great many powers have been conferred on state officials in England as well as in other countries through the enactment of statutes on the part of the legislature. It would be sufficient simply to scan, for instance, the history of the delegation of powers in England in recent years to be quite convinced of this.

It is still one of the deeply rooted political beliefs of our age that because legislation is passed by parliaments and because parliaments are elected by the people, the people are the source of the legislative process and that the will of the people, or at least that part of the people identifiable with the electorate, will ultimately prevail on all subjects to be determined by the government, as Dicey might have put it.

I do not know to what extent this doctrine has any validity if we submit it to such criticisms as those suggested by my fellow citizens, Mosca and Pareto, at the beginning of this century in their famous theories of the significance of leading minorities, or, as Pareto would say, of the elites, and still frequently quoted by sociologists and political scientists in the United States. Regardless of any conclusion we may reach about these theories, the "people" or the "electorate" is a concept not easily reducible to or even compatible with that of the individual person as a particular citizen acting according to his own will and therefore "free" from constraint in the sense we have accepted here.

Liberty and democracy have been concomitant ideals for the countries of the West since the times of the ancient Athenians. But it has been pointed out by several thinkers in the past, such as De Tocqueville and Lord Acton, that individual freedom and democracy may become incompatible whenever majorities are intolerant or minorities rebellious, and in general, whenever there are within a political society what Lawrence Lowell would have called "irreconcilables." Rousseau was aware of this when he pointed out that all majority systems must be based on unanimity, at least in regard to the acceptance of majority rule, if they are to be said to reflect the "common will." If this unanimity is not merely a fiction of political philosophers, but also has to have actual meaning in political life, we must admit that whenever a decision taken by a majority is not freely accepted, but only suffered by a minority, in the same way as individuals may suffer coercive acts to avoid worse on the part of other people like robbers or blackmailers, individual freedom, in the sense of absence of constraint exercised by other people, is not compatible with democracy, conceived as the hegemonic power of numbers.

If we consider that no legislative process takes place in a democratic society without depending on the power of numbers, we must conclude that this process is likely to be incompatible with individual freedom in many cases.

Recent studies in the so-called science of policy and the nature of group decisions have tended to confirm this point in a rather convincing way.[3]

The attempts made by some scholars in recent times to compare such different forms of behavior as that of a buyer or a seller in the market and that, say, of a voter in a political election, with the object of discovering some common factor between them seem to me rather stimulating, not only because of the methodological questions involved relating to economic and to political science, respectively, but also because of the fact that the question whether there is a difference between the economic and the political (or the legal) position, respectively, of the individuals within the same society has been one of the main issues in dispute between liberals and socialists during the last hundred or hundred and twenty years.

This dispute may interest us in more than one respect, as we are trying to evidence a concept of freedom as absence of constraint exercised by other people, including the authorities, which implies freedom in business as well as in any other sphere of private life. Socialist doctrines have maintained that under a legal and political system which grants equal rights to everybody, no advantage in equal rights would accrue to those people who lack sufficient means to benefit from many of these rights. Liberal doctrines, on the contrary, have maintained that all the attempts at "integrating" political "freedom" with "freedom from want" on the part of the "have-nots," as suggested or imposed by the socialists, lead to such contradictions within the system that one cannot grant everybody "freedom," conceived as the absence of want, without bringing about the suppression of political and legal freedom, conceived as the absence of constraint exercised by other people.

But liberal doctrines add something more. They maintain also that no "freedom from want" can be really achieved by decree or by the direction of the economic process on the part of the authorities, such as would be achieved on the basis of a free market.

Now what may be considered as a common assumption of both socialists and liberals is that a difference exists between the legal and political freedom of the individual, conceived as absence of constraint, on the one hand, and the "economic" or "natural" freedom of the individual, on the other, if we have to accept the word "freedom" also in the sense of "absence of want." This difference is appreciated from opposite points of view by liberals and by socialists, but in the last analysis both recognize that "freedom" may have different, if not also incompatible, meanings for individuals belonging to the same society.

There is no doubt that introducing "freedom from want" into a political or legal system implies a necessary alteration of the concept of "freedom," understood as freedom from constraint guaranteed by that system. This happens, as liberals point out, because of certain special provisions of the statutes and decrees of socialist inspiration that are incompatible with freedom in business. But it happens also, and above all, because the very attempt to introduce "freedom from want" has to be made - as all socialists admit, at least in so far as they want to deal with preexisting historical societies and do not limit their efforts to promoting societies of volunteers in some remote part of the world - first through legislation and therefore through decisions on the basis of majority rule, regardless of whether the legislatures are elected, as they are in almost all present-day political systems, or are the direct expression of the people, as they were in ancient Rome or in the old Greek cities and as they are in the present-day Swiss Landsgemeinde.

No free-trade system can actually work if it is not rooted in a legal and political system that helps citizens to counteract interference with their business on the part of other people, including the authorities. But a characteristic feature of free-trade systems seems also to be that they are compatible, and probably compatible only, with such legal and political systems as have little or no recourse to legislation, at least as far as private life and business are concerned. On the other hand, socialist systems cannot continue to exist without the help of legislation. No historical evidence, as far as I know, supports the assumption that socialist "freedom from want" for all individuals is compatible with such institutions as the common law system or the Roman system, where the lawmaking process is directly performed by each and all of the citizens, with only occasional help from judges and such experts as the Roman jurists, and without having recourse, as a rule, to legislation.

Only the so-called "utopians," who tried to promote special colonies of volunteers in order to realize socialistic societies, imagined that they could do so without legislation. But they too actually managed to do without it only for short periods of time, until their voluntary associations turned into chaotic amalgams of old volunteers, ex-volunteers, and newcomers without special beliefs in any form of socialism.

Socialism and legislation seem to be inevitably connected if socialist societies are to keep alive. This is probably the main reason for the increasing weight that is being given in common law systems like the English and the American not only to statutes and decrees, but also to the very idea that a legal system is, after all, a legislative system and that "certainty" is the short-run certainty of written law.

The reason why socialism and legislation are inevitably connected is that while a free market implies a spontaneous adjustment of demand and supply on the basis of the preference scales of individuals, this adjustment cannot take place if the demand is not such as to be met by supply on the same basis; that is, if the preference scales of those who enter the market are not actually complementary. This can happen, for instance, in all cases in which the buyers think that the prices asked by the sellers are too high, or where the sellers think that the prices offered by the buyers are too low. Sellers who are not in a position to satisfy buyers, or buyers who are not in a position to satisfy sellers, cannot make a market, unless sellers or buyers respectively have some means at their disposal of coercing their counterparts in the market into meeting their demands.

According to socialists, poor people are "deprived" by rich people of what they need. This way of speaking is simply an abuse of language, as it is not proved that the "haves" and the "have-nots" were or are all entitled to the common possession of all things. True, historical evidence supports the socialist point of view in some cases like invasions and conquests, and generally in cases of robbery, piracy, blackmail, and so on. But these never occur in a free market, that is, in a system that enables individual buyers and sellers to counteract constraint exercised by other people.

We have also seen, in this connection, that very few economists take into consideration such "misproductive" activities, since they are generally regarded as completely outside the market and therefore not worthy of economic inquiry. If nobody may be constrained, without the possibility of defending himself, to pay for goods and services more than he would pay for them without constraint, misproductive activities cannot take place, since in such cases no corresponding supply of goods and services will be met by demand and no adjustment between buyers and sellers will be obtained.

Legislation may achieve what a spontaneous adjustment could never do. Demand may be obliged to meet supply, or supply may be obliged to meet demand, according to certain regulations enacted by legislative bodies, possibly deciding, as happens, at present, on the basis of such procedural devices as the majority rule.

The fact about legislation that is immediately perceived by theorists no less than by the common people is that regulations are enforced upon everybody, including those who never participated in the process of making the regulations and who may never have had notice of it. This fact distinguishes a statute from a decision handed down by a judge in a case brought before him by the parties. The decision may be enforced, but it is not enforced automatically, that is, without the collaboration of the parties concerned or at least of one of them. At any rate, it is not directly enforceable on other people who were not parties to the dispute or who were not represented by the parties in the case.

"Thus, we reach the conclusion that legislation, being always - at least in contemporary systems - a product of group decisions, must inevitably imply not only a certain degree of coercion of those who have to obey the legislative rules, but also a corresponding degree of coercion of those who directly participate in the process of making the rules themselves."

Thus, theorists usually connect legislation with enforcement, while this connection is not directly emphasized, and in any case is ascertainable to a lesser extent, in decisions of courts of judicature. Very few people, on the contrary, have pointed out the fact that enforcement is connected with legislation not only as the result of the legislative process but also within the very process itself. Those who have a share in that process are themselves subject, in their turn, to the enforcement of procedural rules, and this very fact gives a coercive character to the whole activity of legislation as performed by a group of people according to a previously settled procedure. The same holds true of the activities of electorates, whose task may be defined as that of reaching a group decision about the people to be elected according to procedural rules that have been previously settled for all those participating in the formation of the decision itself.

The existence of a coercive procedure in the decision-making process whenever people are to decide, not as single individuals, but as members of groups, is precisely what renders it possible to distinguish between the process of making decisions on the part of individuals and the same process on the part of groups.

This difference has been ignored by those who, like the English economist Duncan Black, have tried to elaborate a theory of group decisions that would include both the economic decisions of individuals in the market and group decisions on the political stage. According to Professor Black, who has just published a new book about this subject, there is no substantial difference between these two kinds of decisions. Buyers and sellers in the market may be compared, if taken as a whole, to the members of a committee whose decisions are the result of the interrelations of their preference scales according to the law of supply and demand. On the other hand, individuals on the political scene, at least in all those countries where political decisions are taken by groups, may be considered as members of committees, regardless of the special functions of each committee. The electorate could be considered one of these "committees" no less than a legislative assembly or a council of ministers.

In all these cases, according to Professor Black, the preference scales of every member of the committee are confronted with the preference scales of every other member of the same committee. The only difference - but a minor one, according to Professor Black - is that whereas in the market preferences confront each other according to the law of supply and demand, in political preferences the selection of some of them rather than others takes place according to a definite procedure. If we know this procedure, Professor Black maintains, and moreover if we know what political preferences are to confront each other, we are in a position to calculate in advance which preferences will emerge in the group decision, just as we are in a position to calculate in advance, provided that we know the preferences at stake on the market, which ones among them, will emerge according to the law of supply and demand.

As Professor Black assumes, one could speak of a tendency toward an equilibrium of preference scales on the political stage in the same way as one speaks of an equilibrium to which preference scales tend in the market. In brief, we ought to consider, according to Black, both economics and political science as two different branches of the same science, since they have the common task of calculating which preferences will emerge in a market or on the political scene, given a set of known preference scales and a definite law governing their confrontation.

I do not want to deny that there is something correct in this conclusion. But what I do want to point out is that by putting political and economic decisions on the same level and considering them comparable, we deliberately ignore the differences that exist between the law of supply and demand in the market and any procedural law whatever governing the process of confrontation among political preferences (and the subsequent emergence of the preferences to be accepted by the group in its decision), like, for example, the majority rule.

The law of supply and demand is only a description of the way in which a spontaneous adjustment takes place, given certain circumstances, between several preference scales. A procedural law is completely different, notwithstanding the fact that it is also called a "law" in all European languages, just as the Greek language (at least since the fourth century before Christ) used the same word, nomos, to mean both a natural law and a manmade law, like a statute. Of course, we could say that the law of supply and demand is also a "procedural" law, but once again we would be confusing, under the same words, two very different meanings.

The main difference between individual decisions in the market and individual contributions to the decisions of groups on the political scene is that in the market, at least by virtue of the divisibility of the goods or services available in it, the individual not only can foresee exactly what the outcome of his decision is (for instance, what kind and quantity of chickens he will buy with a certain amount of money), but he can also put in a definite relation every dollar he spends with the corresponding things he can acquire.

Group decisions, on the contrary, are of the all-or-none variety: if you are on the losing side, you lose your vote. There is no other alternative, just as there would be none if you went to the market and could find neither goods nor services nor even parts of them that could be bought with the money you have at your disposal.

As a distinguished American economist, Professor James Buchanan, acutely pointed out in this connection,

alternatives of market choice normally conflict only in the sense that the law of diminishing returns is operating.... If an individual desires more of a particular commodity or service, the market normally requires only that he take less of another commodity or service.[4]

By contrast, "alternatives of voting choice are more exclusive, that is, the selection of one precludes the selection of another."

Group choices, so far as the individuals belonging to the group are concerned, tend to be "mutually exclusive by the very nature of the alternative." This is the result not only of the poverty of the schemes usually adopted and adoptable for the distribution of the voting strength, but also of the fact (as Buchanan points out) that many alternatives that we usually call "political" do not allow those "combinations" or "composite solutions" which render market choices so flexible in comparison with political choices.

An important consequence, already illustrated by von Mises, is that in the market the dollar vote is never overruled: "The individual is never placed in the position of being a member of a dissenting minority," at least so far as the existing or potential alternatives of the market are concerned. To put the point the other way round, there is a possible coercion in voting which does not occur in the market.

The voter chooses only between potential alternatives; he may lose his vote and be compelled to accept a result contrary to his expressed preference, whereas a similar sort of coercion is never present in market choice, at least on the assumption of production divisibility. The political scene, which we have at least provisionally conceived as the locus of voting processes, is comparable to a market in which the individual is required to spend the whole of his income on one commodity or the whole of his work and resources in producing one commodity or service.

In other words, the voter is limited by some coercive procedures in the utilization of his capacities for action. Of course, we can approve or disapprove of this coercion, and we can occasionally discriminate between different hypotheses in order to approve or disapprove of it. But the point is that the voting process implies a form of coercion and that political decisions are reached through a procedure that implies coercion. The voter who loses makes one choice initially, but eventually has to accept another that he previously rejected; his decision-making process has been overthrown. This is certainly the main, although it is not the only, difference between individual decisions in the market and group decisions taking place on the political scene.

The individual in the market can predict, with absolute certainty, the direct or immediate results of his choice. "The act of choosing," says Buchanan,

and the consequences of choosing stand in a one-to-one correspondence. On the other hand, the voter, even if he is fully omniscient in his foresight of the consequences of each possible collective decision, can never predict with certainty which of the alternatives presented will be chosen.

This uncertainty, of the Knightian type (that is, the impossibility of assigning any number to the probability of an event) must in some degree influence the voter's behavior, and there is no acceptable theory of the behavior of a decision-maker in uncertain conditions.

Moreover, the conditions under which group decisions occur seem to render it difficult to employ the notion of equilibrium in the same way in which it is employed in economics. In economics equilibrium is defined as equality of supply and demand, an equality understandable when the individual chooser can so articulate his choices as to let each single dollar vote successfully. But what kind of equality can exist between, for instance, supply and demand for laws and orders through group decisions when the individual can ask for bread and be given a stone? Of course, if the members of the groups are free to rank in changing majorities and can partake in revisions of earlier decisions, this possibility may be conceived of as a sort of remedy for the lack of equilibrium in group decisions, because it gives to each individual in the group, at least in principle, the possibility of having the group decision some time or other coincide with his personal choice. But this is not "equilibrium."

"But what kind of equality can exist between supply and demand for laws and orders through group decisions when the individual can ask for bread and be given a stone?"

Freedom to form part of changing majorities is a typical feature of democracy as traditionally understood in Western countries, and this is, incidentally, the reason why many authors feel that they may describe "political democracy" as similar to "economic democracy" (the market system). In fact, democracy appears to be, as we have seen, only a substitute for economic democracy, although it is probably its best substitute in many cases.

Thus, we reach the conclusion that legislation, being always - at least in contemporary systems - a product of group decisions, must inevitably imply not only a certain degree of coercion of those who have to obey the legislative rules, but also a corresponding degree of coercion of those who directly participate in the process of making the rules themselves. This inconvenience cannot be avoided by any political system where group decisions are to take place, including democracy, although democracy, at least as it is still conceived of in the West, gives to each member of the legislating body a chance to form a part sooner or later of winning majorities and so to avoid coercion by making the rules coincide with his personal choice.

Coercion is not, however, the only characteristic of legislation as compared with other lawmaking processes, such as that of the Roman law or of the common law. We have seen that uncertainty proves to be another characteristic of legislation, not only on the part of those who have to obey the legislated regulations, but also on the part of the members of the legislative body itself, since they vote without knowing the results of their vote until the group decision has been made.

Now, the fact that coercion and uncertainty cannot be avoided by the members of the legislative bodies themselves in the process of legislation leads to the conclusion that not even political systems based on direct democracy allow individuals to escape coercion or uncertainty in the sense we have described.

No direct democracy could solve the problem of avoiding both coercion and uncertainty, since the problem is not itself related to direct or indirect participation in the lawmaking process through legislation resulting from group decisions.

This warns us also of the comparative futility of all attempts to secure more freedom or more certainty for the individuals in a country as far as the law of the land is concerned by letting them participate as frequently and as directly as possible in the lawmaking process through legislation by universal adult suffrage, proportional representation, referendum, initiative, recall of representatives, or even by other organizations or institutions revealing the so-called "public opinion" about as many subjects as possible and making the people more efficient in influencing the political behavior of the rulers.

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On the other hand, representative democracies are much less efficient than direct democracies in obtaining the actual participation of individuals in the lawmaking process through legislation.

There are many senses in which representation may be thought of, and some of them certainly do give the people the impression that they are participating in a serious, although indirect, way in the process of lawmaking through the legislation of their country or even in the process of administering the affairs of the country through the executive apparatus.

Unfortunately, what is actually happening in all the countries of the West at present is something that does not afford us any real basis for gratification if we undertake a cold analysis of the facts.

Leoni was professor of legal theory and the theory of the state at the University of Pavia, a practicing lawyer, founding editor of the journal Il Politico, newspaper columnist, and secretary and president of the Mont Pelerin Society. See Bruno Leoni's article archives.

This article is excerpted from Freedom and the Law.

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Notes

[1] As far as Great Britain is concerned, cf. the very accurate analysis of Professor G. W. Keeton, The Passing of Parliament (London: E. Benn, 1952). In regard to the United States, see Burnham, Congress and the American Tradition (Chicago: Regenery, 1959), especially "The Rise of the Fourth Branch," p. 157, and Lowell B. Mason, The Language of Dissent (Cleveland, Ohio: World Publishing Co., 1959).

[2] Cf., for instance, the new (1959) Italian traffic laws, which increase considerably the scope of the discretionary measures enforceable against drivers on the part of such executive officials as the "prefects."

[3] I myself dealt with this subject on two other occasions, namely, in some lectures at Nuffield College, Oxford, and at the Department of Economics, University of Manchester, in 1957.

[4] James Buchanan, "Individual Choices in Voting and in the Market," Journal of Politcal Economy, 1954, p. 338.

Jon Hykawy: Hot and getting hotter. What we've seen recently is a number of deals coming to market looking for financing and those deals are getting done. We're currently in the midst of one Toronto IPO. It's an Australian-listed company called Orocobre Ltd. (AU:ORE). The company just put out press releases suggesting that they're going out and raising $22 million, to be exact. There's a rumor that we're going to see their direct neighbor on the salar in Argentina come to market soon with their IPO. We've seen a number of offtake and partnering agreements being signed including the Toyota Tsusho (OTCBB:TYHOF.PK) agreement with Orocobre. The interest in the sector has never been greater.

TGR: How are these deals getting financed so easily compared to other rare earth deals?

JH: I think part of it is we're seeing so much media attention paid to electric vehicles. I was actually just at the Geneva Motor Show. That particular event was actually being referred to by people in Geneva as the "electric car show." I went in at the behest of my company president to take pictures some of the new hybrids and electric vehicles that are available. I realized about 10 minutes in that I was going to have to ration the number of flashes I was expending from my cell phone camera because I was going to run out of battery. Every major dealer of motor vehicles in the world was represented there and each of them had new hybrids and/or new pure electric vehicles.

TGR: Is the lithium ion battery going to be sustainable over the next two years with potential new technologies coming into the market?

JH: Absolutely. The new technologies that are potentially coming to market are largely new iterations of lithium ion batteries with new chemistries in the cathodes and new materials being used for anodes. You can improve lithium batteries considerably from here. Keep in mind this is a technology that's only really been under development since the mid '80s and commercially since about the late '90s. This is a technology that has a long way to go.

TGR: You mentioned in one of your research reports that you're recommending that investors consider a basket of lithium companies. A lot of these are development companies from what I understand. Are they long-term plays?

JH: They are. Well some of them are longer-term than others. There's really no way to play lithium directly out of the existing producers with the possible exception of Talison Lithium (currently a private company) coming to market; should they come back for the IPO and should that succeed. Talison, in the minds of most investors, I believe, is not going to play a major part in the battery industry. What you're looking for is lithium development companies that can play that role producing inexpensive battery grade lithium. That largely consists of brine and clay producers. That's the basket that we're referring to. It's companies similar to the ones we have under coverage like Western Lithium Corp (TSX.V:WLC), Rodinia Minerals Inc (TSX.V:RM) and Salares Lithium Inc. (TSX.V:LIT).

TGR: Explain the difference between brine and clay producers, if you don't mind.

JH: With regard to brine producers; lithium is commonly produced today by pumping salty water out of dry salt lakes in South America. This has historically continued to be the least expensive way to produce lithium. The lithium is in the brine in the form of lithium chloride salt. What you do to simplify it dramatically is you basically evaporate the water leaving behind the lithium in the brine and then treating it to produce a chemically tractable form. The clay producers are a different story. Western Lithium is one of those companies with an extremely large deposit of a lithium-bearing clay in Nevada, actually near the northern border with Oregon. They have the ability to produce, according to their scoping study, relatively inexpensive lithium. It should be very clean lithium which also brings the cost down for producing that ultra pure battery grade. We're very positive on that possibility and we have a couple of other brine companies that we believe have relatively low cost and can find their way into the market as well.

TGR: You stated earlier that brine-based lithium supplies are active and cannot be produced too quickly, referencing evaporation. If the supply is there, won't it come down to companies that can bring it to market quickly in the long run as far as share value is concerned?

JH: It has to get to market relatively quickly and relatively inexpensively. With any commodity industry, your biggest issue is maintaining control of your costs. You must make sure that when the inevitable price decreases do hit the market, you are not one of the companies that fail as a result. Our basic approach at Byron has been to build a model for what we believe the pure variable cost for production out of a specific deposit is and then look to find the lowest cost potential producers.

TGR: Is the potential nationalization of lithium in Bolivia and Chile where Salares is going to potentially affect the price of lithium?

JH: Actually it's not even potential anymore. Bolivia has announced that they're going to be creating a national lithium company whose mandate I believe is to go out and develop Salar de Uyuni as a source. The media hype over the last year has been that Bolivia is the pending Saudi Arabia of lithium. That Salar de Uyuni is the greatest deposit in the world. I'm afraid that is going to be much more problematic than most people think. Our original lithium report indicated that one of the major cost drivers is the amount of magnesium dissolved in the brine along with lithium. The higher the level of the magnesium, the more expensive it is to produce the lithium and Uyuni is an absolutely marvelous source of magnesium. You're going to have a significant problem developing that economically.

We don't have any shortage of lithium. What we have is a shortage of inexpensive lithium and that's going to come back to bite the Bolivian company. I just don't see how they're going to be able to develop Uyuni at present price points. As far as Chile is concerned, there's been one senator that's proposed nationalizing the industry. The government has just changed recently to a more central right government as opposed to the left-leaning party that was in power previously. I think you're going to see a much more pro-business and pro-mining stance taken by the government there. I don't think nationalization is in the cards.

TGR: When you're looking at a company like Salares in Chile and comparing them with Western Lithium in Nevada, would you as an investor take position in both?

JH: There are different risks associated with each. No one has yet produced commercial quantities of lithium from clay in Nevada or anywhere else for that matter. You have to balance the technology risk. We believe it's relatively minimal because the processing of clay for lithium looks very much like the processing of hematite or magnetite ores for vanadium. That's a process that's been conducted commercially for decades now. Balancing the two, I think you're probably better off finding a basket of collectively low cost potential producers. Fifteen percent of world production comes from FMC (NYSE:FMC) at a place in Argentina called Salar del Hombre Muerto. That is expensive lithium and it's not an inexpensive place to produce from. It's significantly more expensive than Atacama. It leaves a fair bit of room for others to come in and try to take up some of that 15% market share.

TGR: That helps drive the market, does it not?

JH: It absolutely does. It's not only growth in the market overall which we see being significant over the next few years; it's the potential to displace some of the expensive supply that's in the market place today.

TGR: How many companies are in the lithium basket?

JH: We have three names under coverage and they are Canadian-listed companies. We haven't touched companies like Orocobre which has signed an off-take agreement with Toyota Tsusho. This will provide Toyota Tsusho with the ability to buy up to 25% of their first project. That's a significant endorsement making Orocobre a pretty strong company in the space. Beyond Rodinia Minerals, Salares Lithium and Western Lithium, which we like and have under coverage, another Canadian-listed name that is an obvious candidate would be Lithium One Inc (TSX.V:LI). We don't have a recommendation on it at this point but people can look it up. What they'll find is that Lithium One is sharing Salar del Hombre Muerto with FMC. When you have a company producing 15% of the world's lithium just down the road, it's a pretty good indication that you know you might have a commercially viable project on your hands as well. Literally they are right across the salar from one another, so this is not a proximity play. This is a direct neighbor on the same producing salar. That's good in some ways having that proximity. It's bad in other ways in that they are sharing the same water.

TGR: Cobalt is a more prominent component of the lithium-ion battery. Is there a basket of cobalt companies we should be looking at?

JH: I'm going to have to say definitively no and there's a good reason for it. You're right. In current lithium ion batteries cobalt is a significant component. I know a number of institutional clients that have been approached and told that you have to own cobalt and lots of it because there will be huge demands on this as electric cars roll out. But we're also all familiar with what we've seen on YouTube and television regarding battery failure. The fact is that very occasionally these batteries do explode, and at the very least burst into flames. That's actually a function specifically of the cobalt that's in these less than modern lithium-ion batteries.

The cathode material that's in the battery you have in your laptop computer actually contains a material called lithium cobalt oxide. It has the unfortunate property that at the same temperature that it reaches when it's operating and/or being charged it can start to give off oxygen gas. That liberation of oxygen gas is exothermic. That means that the battery heats up even more. So you get into this vicious spiral where the battery heats up and even more so it gives off more oxygen. Before you know it, the battery is very hot and the pressure's built up inside the cell. What's supposed to protect that battery is a small device called a thermistor. That senses the temperature in the battery and if necessary either cuts off charging or cuts off function of the battery entirely until it cools down. Sometimes the thermistors don't work. When the thermistors and other safety systems fail, the battery bursts open and you have a hot battery exposed to oxygen and everything catches fire. The auto manufacturers decided a long time ago that they would not risk the small likelihood or probability of one of these battery cells catching fire. So they've come up with a number of battery chemistries for the cathode that don't include cobalt. This would include the lithium manganese oxide that's intended to be used in the Chevy Volt. It would also include a number of the lithium polymer designs that the Japanese are working on as well as the lithium iron phosphate that A123 Batteries out of the United States has. The lithium vanadium phosphate that BYD Company Ltd. (OTCBB:BYDDF) in China is researching is also relevant. All of these chemistries are inherently safe. None of them have that same potential of popping the battery and causing a fire that lithium cobalt oxide does and none of them contain cobalt.

TGR: Isn't that devastating news for cobalt companies?

JH: I don't believe so. Cobalt companies by and large trade on the strength of the use of cobalt in various steel alloys. Steel is still a very high growth area with demand coming in out of China and other developing regions. If they're trying to trade on the potential of huge uses of cobalt in automotive batteries, I would say they're out of luck. You will probably see a pullback in the use of cobalt even in devices like cellular telephones and PCs with time. The analysis we've done indicates that on a raw material basis, because of the price of cobalt, other materials higher in phosphates, vanadium phosphates, magnesium dioxides which combine with lithium are significantly cheaper than cobalt oxide.

TGR: What is vanadium exactly?

JH: Vanadium is a metal that has some very interesting electrical as well as physical properties. One of the odd things it does is it dissolves in iron and steel creating an alloy. At relatively low levels it can produce extremely strong construction steels. It's used to significantly strengthen and bring up the quality of steels at a very reasonable price point. But at 4% or 5% alloy in steel, vanadium actually makes it strong enough to become high speed tool steels. So these would be the cutting bits in milling machines and that kind of thing. There's not really another material that can do that. People are probably familiar with molybdenum as a steel alloying agent. You run out of the capacity to dissolve molybdenum in the steel long before you reach the strength point that you can achieve with even small levels of vanadium. Niobium is another material you can substitute but it's only about one-third as effective. Therefore, it usually trades about one-third the price of vanadium in the market. More than eighty percent of it goes into steel use like this but we believe there are significant other uses building.

One of those uses is lithium vanadium phosphate cathodes in lithium-ion batteries. There's been a significant amount of research in the last couple of years on which cathode materials make the best potential lithium battery. What you want in a lithium battery is a battery that produces relatively high voltage because voltage equates somewhat directly to power out of a battery. But you also want to produce a battery that has significant energy content. It can hold more per charge than the standard lithium cobalt oxide battery that's out there. Fortunately vanadium phosphate satisfies both criteria. It has a higher voltage-around 4.7 volts or 4.8 volts-compared to about the 3.7 that the standard battery produces today. It also has about 22% more energy content. If you factor that into a car, what you would get is a battery that is inherently safe. It can likely recharge faster because it won't matter if you heat it up a little bit more. It will accelerate and have the capability of accelerating faster because it can produce more power. It will take you 20% to 22% further down the road per charge all at a lower price than a lithium cobalt oxide battery. So we're fairly excited about that and the potential for these batteries to roll down into smaller electronics like laptop computers where operating life is important. The other place where we see it being important is in the manufacture of grid storage technologies like vanadium redox batteries. These redox batteries are very, very large scale storage systems. They last from years to decades before they fail. They can store megawatt-hours worth of energy which is grid level storage and can produce megawatt levels of power. They are not small batteries by any means and are about the size of the building that would contain a big-box store. They can do some very interesting things in terms of backing up intermittent or less reliable forms of alternative energy generation during winter months.

TGR: With all the variations of uses for vanadium would you expect it to see a basket of vanadium companies?

JH: Well we think the potential is certainly there. One of the things that you have to be aware of is that the battery side of the business hasn't hit yet. You don't know with technology. It may or may not work out. We believe it will. We built that into our projects but even the basis of increasing steel demand you need more junior vanadium companies. You need more vanadium in the world.

TGR: Do you see that happening anytime in the near future?

JH: We do. One company that we have under coverage is Largo Resources Ltd (TSX.V:LGO). They have an excellent deposit in Brazil outside a small town called Maracas. It's in fact the highest grade deposit that we've seen. It's not the largest resource that we've seen, but the important thing is getting it out of the ground economically. They have what we believe is one of the lower cost potential vanadium projects in the world. Their likely cost for production is around $13 per kilogram. Vanadium has never gone below about $20 per kilogram in selling price. In the last economic downturn that we've just come out of, a large number of vanadium producers shut their doors because vanadium had dropped to around $30. This company could've easily weathered that and taken a significant market share away from others. They'll be in production we believe relatively soon and are in the process of finalizing project financing for the Maracas project.

TGR: Do you see the demand for this metal increasing since its only use is in steel at this point?

JH: No doubt about it. You're getting significantly higher demands out of China on the basis of Chinese growth alone simply because the Chinese are mandating better and better grades of construction. So your choices in construction are: use twice as much conventional steel at a much higher cost or use vanadium dope steels. Use significantly less steel build buildings that are just as strong but have more workable room inside of them that you can actually lease to people. It comes down to a much easier choice. Stronger grades of vanadium dope steels are used and that's the best choice for any sort of construction today.

TGR: Are there any supply issues related to this metal?

JH: Sadly there are and that's been an unfortunate aspect that may well contribute to curtailing its use in batteries. We've seen the price of vanadium over the last two years fluctuate between currents level of $25 or $30 and as high as $80 or $85 per kilogram. You can't have a material that you're using in significant quantities in a battery vary by that kind of amount and expect to build a business off of it. I can give you some concrete numbers in that regard. If you look at something like the Nissan Leaf and the battery that would go into driving a Leaf, that's a 24 kilowatt hour battery. This is very significant capacity in terms of energy storage. It would use roughly 20 to 25 kilograms worth of lithium carbonate equivalent. Lithium carbonate today sells for about $5,000 a ton. So you're looking at about $100 to about $125 worth of raw lithium going into that battery. The battery will sell for $10,000, a fairly insignificant amount. Were that battery to be constructed using lithium vanadium phosphate chemistry, it would contain several thousand dollars worth of vanadium. If it were to suddenly triple in price it might go from $2,000 worth of vanadium to $6,000 or $7,000 worth of vanadium. Suddenly the manufacturer of that battery doesn't see any margin on any sale. In fact they might be selling those batteries at a loss. No one's going to risk a long-term contract on those batteries. If there's no long-term contract the automotive manufacturers certainly aren't going to use it. What you need to really satisfy the requirement for stable pricing is additional supplies in the market.

TGR: Are there potential projects out there where we'll find more vanadium or is it just truly a supply issue in the world?

JH: I know of four listed companies in Toronto. As well as Largo, there's a Chinese play called Sino Vanadium (TSX.V:SVX) as well as Energizer Resources (OTCBB:URST;FWB:YES) (formerly Uranium Star) that has a project in Madagascar. There is also a company called Apella Resources Inc (TSX.V:APA;FWB:NWN). There are absolutely projects, but here again it's a matter of finding economic deposits. They're tougher to come by in the vanadium space than many because it is a relatively scarce material.

TGR: This has been very informative. Thank you for your time.

Toronto-based Jon Hykawy, who earned his PhD in physics (University of Manitoba, 1991) and an MBA (Queen's University, 1997), spent four years in capital markets as a clean technologies/alternative energy analyst before being named lithium analyst at Byron Capital Markets in August. Jon began his career in the investment industry in 2000, originally working as a technology analyst concentrating on the lithium space. Jon has become a valuable resource on everything about the light, silver-white metal-from supply and demand to exploration and production. He has extensive experience in the solar, wind and battery industries, conducting significant research in the areas of rechargeable batteries, from alkaline to lithium-ion to flow batteries.

Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page.

DISCLOSURE:
1) Ellis Martin of The Gold Report conducted this interview. He personally and/or her family own shared of the following companies mentioned in this interview: None
2) The following companies mentioned in the interview are sponsors of The Energy Report or The Gold Report: Western Lithium Corp., Salares Lithium Inc.
3) Jon Hykawy does not own any of the stocks mentioned in this article, nor does he receive compensation from any of the companies mentioned.

What will that change look like? Speaker Nancy Pelosi (D-CA) said, "we have to pass the bill so that you can find out what is in it," and President Barack Obama said, "By the time the vote has taken place, not only will I know what's in it, you'll know what's in it."

In other words, here's a ticket to ride, get on board, we can't tell you where it's going, but you'll like it once you get there. We promise.

A picture of America's future under Obamacare can be revealed, though, after peeling away the pages and digging through the dirt. Here's 10 things you can expect: 

1. A Massively Engorged Government, to the tune of $2.5 trillion in new entitlement spending. According to the Congressional Budget Office (CBO), new entitlement spending in the plan would cost $216 billion by 2019, then increase by 8 percent every year thereafter.
2. A Cornhusker Kickback for All. No, special deals aren't removed from Obamacare this time around. Instead, the House bill extends new federal funding for Medicaid to all states. Incidentally, you're paying for it.
3. A Freight train of taxes, slamming the American people in 2018. You've heard of the "Cadillac" tax on high-cost insurance plans? It will be pushed back to 2018, and given the way "high-cost" plans will be defined, a large segment of the middle class would get hit with the tax over time.
4. Beware the shape-shifting tax monster. New taxes will take many forms, including taxes on prescription drugs, medical devices (like wheel chairs), and health insurance.
5. Unconstitutional mandates, courtesy of Congress. Don't want to buy health insurance? Congress will penalize you if you don't, regardless of income.
6. Lock your back door. Higher health care costs will be sneaking in. The plan gives subsidies to low-to-moderate wage families, but the subsidies will increase at a lower rate than the rate at which premiums increase. In other words, those families will pay more every year.
7. Lights out for small businesses? Companies that hire certain low-income Americans will have to pay $3,000 per employee, per year, even if the company offers insurance.Oh, and if a company employs 50 or more workers, they'll face higher tax penalties to the tune of $2,000 per full-time employee.
   
8. Abortions. You will pay for them, like it or not. The House bill includes major funding for community health centers with no restrictions on federal taxpayer funding of abortions.
9. Want to play the stock market? Maybe not, after you hear this. The House bill slaps a 3.8% tax on investment income.
10. It's not a federal system, after all. States will have less power. They'll no longer have authority to regulate health care premiums. Instead, the federal government will take on the job. States and local governments won't be able to control their own employee health plans; they'll have to abide by new federal regulations.

Even the Administration's Chief Actuary at HHS cannot provide cost analysis of latest Democrat health spending bill before the vote.

Chief Actuary: 'I regret that my staff and I will not be able to prepare our analysis within this very tight time frame, due to the complexity of the legislation. 

      WASHINGTON, DC - The Obama administration's chief actuary at the Centers for Medicare and Medicaid Services (CMS) notified Republican leaders Saturday that the "very tight time frame" and "complexity" of the Democrats' health spending bill would prevent them from fully analyzing the costs and efficacy of the bill before the House voted on the legislation. The letter was in response to a request from House and Senate Republicans.

            The Chief Actuary, Richard S. Foster, wrote: "In your letter, you requested that we provide the updated actuarial estimates in time for your review prior to the expected House debate and vote on this legislation on March 21,2010. I regret that my staff and I will not be able to prepare our analysis within this very tight time frame, due to the complexity of the legislation."

            Foster and his staff analyzed the Senate-passed bill and determined that it bent the cost curve up, estimating in a January 8 report that national health expenditures would increase by an estimated total of $222 billion, and that the additional demand for health services "could be difficult to meet" and "could lead to price increases, cost-shifting, and/or changes in providers' willingness to treat patients with low-reimbursement health coverage." Foster, in his letter today, expects the new health spending bill to be "generally similar."

            House Republican Leader John Boehner said: "The House of Representatives should not vote blindly on an issue that is so important to every American.  We deserve to have all the facts about how much this bill raise health care costs before we vote.  The decision to press ahead and jam this bill down the throats of the American people is just one more example of arrogance and irresponsibility from Washington Democrats."

            Senate Republican Leader Mitch McConnell said: "Americans deserve to have a full analysis of this bill, but won't because of the mad dash forced by the Democrat leaders in the House. We now know that even the Obama administration's chief actuary predicts more government spending, more price increases for consumers and less care for low-income patients. This debate was supposed about lowering costs for Americans not making things worse."

            The letter to CMS was signed by McConnell, House Republican Leader John Boehner, Senate Republican Whip Jon Kyl, House Republican Whip Eric Cantor, Senate Budget Committee Ranking Member Judd Gregg, Senate Finance Committee Ranking Member Charles Grassley, Senate Health, Education, Labor and Pensions Committee Ranking Member Mike Enzi,  House Budget Committee Ranking Member Paul Ryan, House Ways and Means Committee Ranking Member Dave Camp, House Energy and Commerce Committee Ranking Member Joe Barton, and House Education and Labor Committee Ranking Member John Kline.
-----
Full text of the letter to Republican leaders follows:
The Honorable Mitch McConnell
Republican Leader
United States Senate

Dear Senator McConnell:

This letter is in preliminary response to your inquiry of March 19 requesting an updated analysis by the Office of the Actuary of the Patient Protection and Affordable Care Act (as passed by the Senate) as it would be modified by the "Amendment in the Nature of a Substitute to H.R. 4872, the Reconciliation Act of 2010" (as released by the House Committee on Rules on March 18). The request was made jointly by yourself and 10 other members of the House and Senate Republican Leadership.

In your letter, you requested that we provide the updated actuarial estimates in time for your review prior to the expected House debate and vote on this legislation on March 21,2010. I regret that my staff and I will not be able to prepare our analysis within this very tight time frame, due to the complexity of the legislation. We will, however, continue working to estimate the financial, coverage, and other impacts of the health reform package and will provide these results to you as quickly as possible.

As you know, the Office of the Actuary has assisted Congressional Administration policy makers on health legislative and policy initiatives for many years, including the original Medicare legislation in 1965, all subsequent amendments to this program, Medicaid amendments since 1976, and the Clinton Administration's proposed Health Security Act in 1993-94. Our goal has always been to provide independent, objective technical information for use by policy makers as they deliberate Medicare, Medicaid, and national health reform proposals.

We issued an analysis of the Senate Patient Protection and Affordable Care Act in a memorandum dated January 8, 2010. While it is reasonable to expect that our updated analysis of this legislation, as modified by the reconciliation amendments, would be generally similar to the results in the January 8 memorandum, I cannot confirm this expectation without a full evaluation of the amendments and re-estimation of the provisions.

I am sending a similar letter to House Republican Leader Boehner, and, for expediency, will email copies to the other cosigners of your request. I am sorry that we cannot respond more quickly. Please let us know if you have any other questions we can assist with.

Sincerely,
Richard. S. Foster
Chief Actuary 

Between now and the election I shall make a point of discussing some of these other factors that an intelligent voter should want to consider before casting his or her ballot. Despite stiff competition from matters like Europe, immigration, law and order and the near-destruction of our education system, one is perhaps worse than all the others: the insidious and at times quite terrifying assault on our civil liberties. - UK Telegraph

Dominant Social Theme: Britain on the brink.

Free-Market Analysis: It is passing strange to read this article (excerpted above) by Telegraph writer Simon Heffer because it takes on a subject that British mainstream pundits seem to avoid for the most part - Britain's endless and growing authoritarianism, in some ways akin (in our opinion), ironically, to the 20th century fascism of Germany that British soldiers fought against so valiantly. The article appears at virtually the same time as another one on the same subject by Telegraph writer Philip Johnston - a book excerpt actually. Both are interesting summations of this discouraging British trend.

Of course, we've been aware of such an increasing diminution of freedom for years, ever since we observed the vituperation aimed at former prime minister Margaret Thatcher when she tried to institute modest free market reforms in Britain. It was almost like there was a sickness wafting from Britain, the smell of irrevocable envy, the stench of what Samuel Johnson called compulsive "leveling." It is very sad what has happened to Britain. Once Albion basked in the reflected glory of Johnson's Rambler; today it bathes in the muddy waters of BBC corporate rhetoric.

In fact, when one observes the great achievements of Britain in the arts, but most importantly in literature, it is hard not to be an Anglophile - and to grieve for what was. The list of great British writers, especially, is endless, a roll call of burnished prose and glorious poetry. Read any playwright and then read Shakespeare and you will see the difference. He truly deserves his reputation (or Edward de Vere may anyway). But there is much more to this once great culture - common law, the Magna Carta ... Where has the greatness gone?

All the focus seems to be on politics, now, on the endless British obsession with class structure, various accents and, of course, politically correct egalitarianism. If one reads the British press, it seems like one can never get away from analyses of the policies of the country's former prime minister Tony Blair (he of New Labour) and now the pitiless Gordon Brown (pictured above left), who has aimed his great, munching jaws at what is left of the genius of British life and culture.

The troubles with Britain go beyond the leadership, though, and seem to raise questions about British citizens themselves. The country, especially under New Labour, has tolerated tremendous erosions of freedom seemingly without a murmur. On the whole, the British populace seems content to sink into the morass of socialism and authoritarianism without much of an (visible) outcry.

Given what is expressed above, these two articles in the Telegraph constitute a welcome change of pace. Of the two articles, we actually prefer the second entitled "Bad Laws," with a cut line reading as follows: "Labour has clowned around with our freedom ... This nanny-state government's legislative tinkering leaves no one better off, says Philip Johnston in an extract from his new book. 'Bad Laws.'" (Constable). Johnston in the excerpt doesn't get bogged down; he cuts right to the heart of what's gone wrong:

Think of all the things we could do 15 or 20 years ago that we can't do now. On July 1, 2007, it became a criminal offence throughout the United Kingdom not merely to smoke a cigarette in a public place, but in your own car if other people share it to travel to work or if it is used for work purposes. It is also an offence to smoke in a room in your own home if it doubles as a workplace. It is now a crime, punishable by up to five years in prison, to smack your own child if a visible mark is left as a result. It is also an offence to mount a horse and ride off in pursuit of a fox. Since 1997, it has been a crime to possess any handgun, even a .22 calibre, for sporting purposes. An individual whose most aggressive instinct is to fire at a target can no longer do so in this country, even under licence, though special dispensation has been given to the British team for the 2012 Olympics in London.

Since 2003, it has been illegal to own a horse, donkey or a Shetland pony without obtaining an identity card for the animal, to ensure it does not poison anyone who eats it. At the same time, a thief who steals goods worth £200 or less from a shop is no longer arrested but handed an £80 fixed-penalty notice, without any criminal record provided it is paid on time. Even teenage "canoodling" is now criminalised under the Sexual Offences Act 2003, which forbids under-16s from engaging in any sexual activity.

Under counter-terror laws, photographers and train-spotters have been threatened with arrest; under health and safety laws, teams of topple-testers roam the country's cemeteries to ensure gravestones are not going to fall over; under new vetting laws, nine million people, many of them volunteers, will have to show they are not potential child-molesters. ...

Our common sense has been stolen. In its place we have been given new laws - dozens of them, hundreds of them, thousands of them. A long tradition of pragmatism has been replaced by a legalistic approach to everything. Where common law once provided the glue to our society, statute has taken its place. It has restricted the scope for discretion and for latitude; and this inflexibility has made us angry, not least when we discovered that many of the very people who were supposed to be keeping an eye on this - our MPs - were spending their time devising ever more imaginative ways of living the good life at our expense.

Simon Heffer, while somewhat more cerebral in his approach, makes a good beginning, which we've already excerpted above. We won't quote anymore, but you can go and read as you wish at the UK Telegraph website. These two articles constitute some much-needed analysis as regards Britain's loss of freedom (especially under New Labour). And while we would endorse the Telegraph's frankness, we still wonder why such sentiments are not more regularly reflected at the Financial Times, the Economist and other publications that once espoused the virtues of British classical liberalism but now seem only to prattle endlessly about the obscene marginalia of regulatory democracy.

But as long as we are on the subject, we should try to be fair. Britain's decline, it must be said, mirrors America's. These two countries are run by the same elite clique, in our opinion, and when one makes a comparison of the various political classes and their agendas, one can find an astonishing parallelism. The "special relationship" between Britain and the United States has little to do with culture at this point and everything with the elite obsession to dominate the global economy. Where one moves, the other goes. The two countries speak with one voice, and the sound, as George Orwell once wrote, is astonishingly similar to "a boot stamping on a human face - forever."

Just as England's national personality is being vitiated by the nation's strange immigration policies, so the American political class apparently attempts to do the same through "open borders" legislation. Just as Britain's nationalized health-care system degrades into ruin, so America's political classes tremble on the brink of initiating a similar disaster. Just as America fights war after unjustifiable war, so do British pols chase along behind, making the necessary military commitments in a seemingly desperate attempt to keep up. The two nations share a common heritage, but increasingly they share a commitment to hyper-regulation as it affects all aspects of the nation-state, from the environment, to business, to banking and beyond.

But we are optimists, and chroniclers of the change-making Internet. Much of the vitality of the British press is reflected in web-sites and blog-sites these days, many of which are astonishingly anti-EU and classical liberal in tone and sentiment. Eventually, we would have to believe, such sentiments will infect the larger mainstream British press, just as the conversation about freedom has steadily pushed such American outlets as Fox toward a more honest sociopolitical dialogue. (Though, Lord knows, it has a long way to go.)

Conclusion: We think, therefore, that the two nations will also inevitably share a commitment to increased free-market thinking. That change is already visible in the steadily rising Tea Party movement in the US. And while the British don't seem to have a similar movement at the moment (unless its UKIP?), we have to believe that the socialist permafrost that has seemingly overlaid British aspirations for freedom will eventually thaw. Perhaps these two articles, and the concerns they voice, signal the beginning of such a (mainstream) thaw. Of course, maybe they only signal, in earnest, the start of the election cycle.

------------------------------------------

"On Christmas Eve morning, Senate Democrats managed to strong arm enough members with giveaways such as the 'Cornhusker Kickback' and 'Louisiana Purchase' to pass Senate Majority Leader Harry Reid's (D-Nev.) healthcare bill.  

This $2.3 trillion legislation, packed with tax increases, insurance mandates, Medicare cuts, and rationed care, will soon hit the House floor.  House Speaker Nancy Pelosi (D-Calif.), who lacks the necessary votes, will attempt to pass a rule offered by House Rules Committee Chairwoman Louise Slaughter (D-N.Y.) to establish a scheme by which the Senate-passed health care bill would be deemed as passed by the House without an actual up-or-down vote.  On behalf of the more than one million members and supporters of the Council for Citizens Against Government Waste (CCAGW), I urge you to oppose both the "Slaughter Rule" and the Reconciliation Act of 2010.

"The so-called 'Slaughter Solution' is nothing more than a deceptive and dishonest procedural maneuver that will excuse members from putting their name on a monstrous piece of legislation that has been rejected by Americans nationwide.  CCAGW cautions all members of Congress: a vote for the 'Slaughter Solution' is a vote for the Senate healthcare bill.    

"Under the Senate-passed healthcare bill, Americans will be forced to shoulder the burden of new taxes, penalties and higher insurance premiums.  Small businesses will be hindered by stringent regulations and taxes that will ultimately force them to slash jobs. 

"Seniors will see their Medicare benefits significantly reduced, resulting in limited choices and higher costs.  While Medicare will be cut, Medicaid will be expanded, despite the fact that the program is going broke and states are struggling to keep up with the expiring federal matching program.  Imposing an unfunded mandate will only exacerbate Medicaid's problems. 

"Mandating coverage would provide a huge incentive for employers to drop health insurance since the tax penalty would be less expensive than the cost of providing coverage.  Thousands of Americans will lose their current health insurance and move to the government-run plan.   Additionally, imposing an individual mandate will penalize Americans who genuinely cannot afford to pay for health insurance.  

"The Senate-passed healthcare legislation will unquestionably burden Americans with countless mandates, taxes and regulations and would be a stepping stone toward total government control of the nation's healthcare system. 

"Some members of Congress have vowed to 'fix' these many problems using reconciliation.  However, using after-the-fact 'sidecar' budgetary amendments to alter one-sixth of the American economy is not an appropriate use of power.  The Reconciliation Act will do nothing to improve the Senate healthcare bill.  In fact, it increases the cost and complexity of the Senate-passed bill, and does nothing to stop the government takeover of healthcare.

"There are many problems with the nation's current healthcare system that can be rectified through medical liability reform, pooling health insurance, offering tax incentives, allowing states to customize programs, and reforming insurance regulations.  Forcing a government takeover of healthcare, especially through parliamentary gimmicks, will not solve America's healthcare problems, it will only exacerbate them. 

"Members of Congress cannot hide behind irresponsible procedural tricks.  All votes on the 'Slaughter Rule,' the Senate-passed healthcare bill, and the Reconciliation."

CCAGW is the lobbying arm of Citizens Against Government Waste, the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.

----------------------------------

It's time to stand up and be counted. Boehner's letter to Speaker Pelosi is linked and pasted below. Please feel free to share this info with any interested parties. 

PDF LINK TO REPORT

March 19, 2010

The Honorable Nancy Pelosi

Office of the Speaker

H232 Capitol

Washington, DC 20515

Dear Speaker Pelosi:

It appears the House of Representatives will proceed with plans to vote this weekend on President Obama's health care legislation, despite the well-documented objections of the American people to both the contents of the bill and the manner in which the Democratic leadership hopes to pass it.

This weekend's votes will be among the most consequential votes we will ever cast as Members of Congress.  As such, it is my belief that every Member should stand before the American people and announce his or her vote as the final decision is made.

With this in mind, I request that you use your discretion under the Rules of the House of Representatives, Clause 2 and 3 of House Rule XX, to conduct the record vote by call of the roll for both adoption of the Senate health care bill (i.e. the Senate Amendment to H.R. 3590, as passed on Christmas Eve this past year) and for the rule making that bill in order.

Thank you for your consideration of this request.

Sincerely,

As early as this week, the House of Representatives will vote on the Senate-passed health care bill as well as a reconciliation package making changes to the bill. While Speaker Pelosi asserts that health care reform will create four million jobs, we disagree. In our view, the health care bill contains a number of provisions that will eliminate jobs, reduce hours and wages, and limit future job creation.

New Taxes. The bill raises taxes by almost $500 billion over ten years. A significant portion of these tax increases will fall on small business owners, reducing capital and limiting economic growth and hiring.

New and Increased Medicare Taxes. An increase in the Medicare payroll tax included in the bill will affect small businesses employing millions of Americans. Over time, higher payroll taxes will decrease wages for these employees. And a new Medicare tax on investment income such as interest, dividends, and capital gains proposed by President Obama and likely included in the bill will threaten jobs and decrease economic growth.

Employer Mandate. The bill will impose a tax of $2,000 per employee on employers with more than 50 employees that do not provide health insurance. The bill will also tax employers that offer health coverage deemed "unaffordable" by the government. These new taxes on employers will reduce employment or be passed on to workers in the form of lower wages or reduced hours.

In addition to constricting economic growth and reducing employment, the health care bill will increase spending on health care and will increase the cost of health coverage. The new and higher taxes on America's small businesses and workers included in the bill are detrimental to job creation and economic growth, especially now given the fragile state of the economy. The Congress should instead enact a health care bill that will reduce spending on health care, reduce the cost of health coverage for every American, and that does not harm the economy or cost jobs.

Sincerely,

Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that it filed a lawsuit against the Obama Department of Health and Human Services (HHS) to obtain documents related to President Obama's closed-door health care meetings with Vice President Biden, HHS Secretary Sebelius, Speaker Pelosi, Majority Leader Reid and union officials in violation of a campaign promise to broadcast all health care discussions on C-SPAN.

According to Judicial Watch's lawsuit, filed on March 17, 2010:

At an August 21, 2008 town hall meeting in Chester Virginia, presidential candidate Barack Obama promised the nation that, to achieve health care reform, "I'm going to have all the negotiations around a big table. We'll have doctors and nurses and hospital administrators. Insurance companies, drug companies - they'll get a seat at the table, they just won't be able to buy every chair. But what we will do is, we'll have the negotiations televised on C-Span, so that people can see who is making arguments on behalf of their constituents, and who are making arguments on behalf of the drug companies or the insurance companies. And so, that approach, I think is what is going to allow people to stay involved in this process."

In a startling breach of his campaign promise, between January 1, 2010, and January 15, 2010, President Obama, Vice President Biden, Health and Human Services Secretary Sebelius, and White House Office of Health Reform Director DeParle met behind closed doors with various groups to reach accord on health care reform before a final vote occurred in the U.S. House of Representatives. One group of individuals was senior officials of major unions. A second group consisted of Senate Majority Leader Reid and House Speaker Pelosi and other members of Congress.

Because President Obama and Secretary Sebelius held closed door negotiations at the White House, the public was denied the transparency President Obama had promised as a candidate.

In order to try to restore some minimal degree of transparency to the negotiations, Judicial Watch filed its original Freedom of Information Act (FOIA) request on January 15, 2010. HHS acknowledged receipt of Judicial Watch's request on January 19, 2010. On January 21, 2010, and March 12, 2010, HHS indicated that two offices within the agency found no responsive requests. However, the Immediate Office of the Secretary and the Office of the Secretary Scheduling Office have thus far failed to respond. As Judicial Watch noted in its FOIA lawsuit, these are the two offices within HHS most likely to have custody of the requested records.

"First President Obama breaks his promise on making health care negotiations public and now his administration is stonewalling the release of records from his secret health care meetings. The President and liberals in Congress are on the verge of staging a government takeover of our health care system, and the American people, at this key moment, are completely in the dark. This lawsuit is designed to hold President Obama to his promises of transparency. It is shameful that the Obama administration would violate FOIA law to help ensure passage of Obamacare," stated Judicial Watch President Tom Fitton.

--------------------------------------------

The latest wrangling over the Falkland Islands erupted as oil resources near the islands have once again made them a tempting target for Argentina. Yet last month, the Obama Administration could have easily averted the growing crisis by staking out a position on the side of England, America's formerly closest ally. A country whose help is needed in Afghanistan, and whose government could have used a boost after being repeatedly undermined by Obama. Instead the Obama Administration staked out a neutral position, which in the context of geopolitics was a statement that Britain was on its own.

While Obama could have easily put a stop to the escalating crisis by stating clearly that the United States was prepared to back England, just as England had backed the United States in Afghanistan and Iraq-- his declaration of neutrality emboldened left wing Latin American leaders like Hugo Chavez to jump into the fight on Argentina's side. In her meeting with left wing Argentinian President Christina Kirchner, Hillary Clinton could have quietly pressed her to back down. Instead Clinton endorsed a call for talks in order to resolve the status of the Falkland Islands. Which actually moved the United States away from supporting neutrality, and toward supporting the Argentinian position.

The entire matter may seem like a tempest in a teapot to many Americans, but it's actually quite important for a number of reasons.

Christina Kirchner or "Queen Christina" is another one of Chavez's puppets. Two years ago Franklin Duran was convicted of serving as an illegal agent for Chavez's government as part of an attempt to silence Guido Alejandro Antonini Wilson, who had tried to relay a suitcase with 800,000 dollars from Chavez to Kirchner's election campaign. The entire incident was heavily tied to the oil industries in Venezuela, Argentina and Chavez's own oil ambitions.

If Chavez and Kirchner can take the Falklands from England, there is a great deal of oil and power in it for them. Under the waters around the Falkland Islands there may be as much as 60 billion barrels of oil. That's almost as three times as much as the oil reserves of the United States. It's more than Libya and Qatar have put together. And it is over 80 percent as large as Venezuela's own hefty oil reserves.

And both Chavez and Kirchner need it. Argentina's debt has risen under Kirchner, and Chavez's hook into Argentina depended on his offer to refinance Argentina's debt on favorable terms. Chavez got access to Argentina and the corrupt Kirchners got an economic savior. But Argentina's economy continues to head downhill and Chavez's influence building is proving to be expensive. Forcing England out of the Falklands would bring him one step closer to a vision of a Latin American OPEC under his control. But losing Kirchner would be a fatal blow to his tenuous Latin American coalition.

And Kirchner has become wildly unpopular in Argentina. And it will take a good deal more than a suitcase with 800,000 dollars to save her. A second successful Falklands war however might do the trick. It might also backfire badly. And while Chavez hates America, he isn't a fool. Which means that if the Obama Administration had sent a clear signal that it would back the UK, the entire affair would have evaporated in a puff of angry rhetoric and fitful lawfare. But that is now less likely to happen than ever. And Obama and Hillary Clinton are to blame for it.

Chavez warned England, "Be sure that the Argentine homeland is not alone, because it is also our homeland." The British government in turn has warned that it will do whatever is necessary to protect the Falklands and dispatched the HMS Spectre, a nuclear powered submarine to the region, in order to protect its shipping and interests, and avert any thoughts of a second surprise Argentine invasion. But while the idea of an Argentinian-Venezuelan war with England might seem a non-starter the second time around, this time Argentina will not only enjoy Latin-American backing, but Russian backing as well.

The Russians have turned Chavez into the new Castro, and Venezuela into the new Cuba, pouring money into it, and helping Chavez buy influence and radicalize the region. Chavez's plans originate from Moscow, much as Nasser's once did. And Venezuelan agents like Franklin Duran, actually began their careers in bed with the Russians. If war does come, the invasion forces will not be flying old Mirages the way they were in the original Falklands War, but they will have top of the line Russian equipment.

In light of this, the Obama Administration's failure to checkmate Putin, Kirchner and Chavez veer on the downright treasonous. Because a Second Falklands War would not only cost the lives of British soldiers, but the lives of American soldiers as well. Whether a Second Falklands War takes place or does not take place, the UK will be forced to divert military resources to coping with the threat. Which means there will be a further strain on the British military, and its ability to offer any assistance in Afghanistan, at a time when a crucial campaign to break the Taliban is underway.

The loss of British support will further undermine our ability to win in Afghanistan. It may well cost American lives. Yet when Hillary Clinton met with Christina Kirchner, she didn't yell at her or berate her, as she did Israeli Prime Minister Netanyahu. Instead she backed her call for negotiations and agreed to have the United States serve as an intermediary. Which was as good as selling England down the river. England naturally rejected the call for meditation, but the damage had already been done.

The Obama Administration has made it clear that despite the presence of thousands of Britons on the islands, they consider the status of the islands open to negotiation. The fact that the Chavez axis is fundamentally hostile to America and American interests and represents a Russian wedge in the hemisphere, means that the Obama Administration once again has sold out an ally at the expense of an enemy.

The Kirchner government celebrated Hillary Clinton's agreement to its proposal for negotiations. As it should. And to understand how grave Obama's betrayal of Britain was, just read their statements.

Héctor Timerman, the Argentine Ambassador to the US, said he had never seen "such substantial support" from Washington for his country's claim. Mrs Clinton had not only offered to mediate but had also signalled that talks should be in line with existing UN resolutions, he insisted, referring to non-binding UN General Assembly resolutions from the 1970s that urge both sides to negotiate.

Ruperto Godoy, the official Argentine government spokesman on the islands, said the new pressure from Mrs Clinton was "very significant, very important" and would help Buenos Aires to force Britain to the negotiating table.

If Chavez and his allies get their hands on the Falklands oil, it will increase his leverage and power base. It will also inevitably raise the price of oil, which will further damage the US economy. That money will then be used to fuel terror in Columbia and raise up more Marxist regimes in Latin America. It will of course also be used to expand the Islamic-Marxist Red-Green alliance with countries such as Iran.

Meanwhile the British who did stand by the US after 9/11 in the War on Terror have now been left out in the cold by an Obama Administration that prefers to seek solidarity with America's enemies, rather than its allies. And now Britain, like Israel, is discovering just how far the radical in the White House will go to sell out to the free world to its enemies.

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From NY to Jerusalem, Daniel Greenfield Covers the Stories Behind the News

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San Francisco, March 17, 2010 - Today the Pacific Research Institute (PRI), a free-market think tank based in California, released a first-of-its-kind report on the potential cost of increased federal control of health insurance.  Taxing Health Insurance: How Much Do States Earn? by author John R. Graham, PRI director of Health Care Studies, provides state-by-state estimates of revenues from premium taxes on health-insurance policies.

"As the majority party continues to push health care reform through Congress, there is mounting concern from the public about its costs and consequences," said Mr. Graham. "One consequence that has gone completely under the radar is the effect of increased federal control of health insurance on states' revenues." 

Taxing Health Insurance finds that federal reform could cause more people to leave state-regulated private health insurance for either federally regulated private insurance, or government-run health plans. "This will result in reduced revenues for states charging premium taxes on state-regulated health insurance," said Mr. Graham. "Such reductions could have devastating consequences since these revenues go into states' general funds, and support safety-net programs such as  Medicaid and SCHIP programs."

Revenues from Health-Insurance Premium Taxes

The report analyzes premium-tax revenue from state-regulated health insurance in relation to states' expenditures on Medicaid and the SCHIP to demonstrate the importance of these revenues to each state's safety-net budget. These revenues are most important in Nevada, Hawaii, New Mexico, South Dakota, and Georgia, ranging from 12 percent to 32 percent of states' Medicaid and SCHIP spending. 

"At a time when many states are facing sharp budget deficits, it would be unwise to implement a federal program that could deteriorate even further states' fiscal conditions," said Mr. Graham. "More important, on the brink of health care reform, states should begin to report premium-tax revenues by line of insurance and not just in aggregate. This would allow for a more accurate evaluation of the consequences of a federal takeover of health insurance."

"As the federal government reaches deeper into states' pockets, this report should serve as a call for greater transparency and accuracy in states' accounting for their health- insurance premium taxes," concluded Mr. Graham.

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Taxing Health Insurance: How Much Do States Earn? was authored by John R. Graham.  To arrange an interview with Mr. Graham, please contact PRI's Press Office at (415) 955-6136 or kgorton@pacificresearch.org.

About PRI
For 31 years, the Pacific Research Institute (PRI) has championed freedom, opportunity, and individual responsibility through free-market policy solutions. PRI is a non-profit, non-partisan organization. For more information please visit our web site at http://www.pacificresearch.org