It’s amazing. I always found it odd when applying for a mortgage that banks considered income, but not asset base. If I have a bunch of money and invest in an investment that’s growing in value by 33% per year but not throwing off income, they won’t consider that in deciding to grant a mortgage. But if I put the same money in the same investment that throws off taxable income every year, it reduces my effective return by more than a third (since my combined tax brackets are more than 33%).
Let’s review: Person A invests and is making 33% on their money yearly. Person B invests and is making 20% on their money. Yet banks consider person B, who made the stupider financial decision, to be a credit risk.
Not to be outdone, the State of Massachusetts is doing this now, too, with Romney’s mandatory Health Insurance law. (He claims to be business savvy, but if this is an example of his overwhelming business sense, I’m missing it.)
First, let’s look at the policies: the quoted premiums for a $2,000-deductible policy are $350/month ($4,200 per year). A $3,000 deductible policy is $300/month ($3,600 per year). So here’s the choice: I can pay a guaranteed extra $600 yearly for the $2K deductible, or I can risk that I’ll need more than $2,000 worth of medical help and if my bill makes it as high as $3,000, I might pay out an extra $1,000 under the higher-deductible plan. P.S. I haven’t even visited a doctor in five years.
So: guaranteed pay $600/year or take a risk of maybe paying $1,000/year? To me, the choice is obvious. Take the maybe $1,000, since I certainly won’t need $3k of medical coverage every year, and the extra $600 in premiums will be a guaranteed yearly payout.
But the wonderful MBA-inspired law mandates the $2,000 policy. So I’m stuck paying for this silly policy that’s a bad financial decision.
If you believe people should simply be required to buy their own insurance, Gosh darn it, let them buy the insurance that makes sense.
If you believe that we should have a national insurance program, Gosh darn it, do that.
But isn’t it absurd to say, “Gee, people aren’t buying insurance because they can’t afford it, so let’s just mandate it. And while we’re at it, let’s mandate a financially crappy requirement for the people who actually have some financial literacy.”
Romney, hats off to you. You made a third of a billion dollars writing checks to buy other people’s companies while they did the work to make them profitable (yes, yes, picking up a pen is hard work when you don’t have someone to sign for you, but we sympathize). Oh, right, you also laid people off to get those companies to profitability.
Of course, it made good practice for your time as Governor. You ran on a business development platform, and we lost 126,000 jobs during your tenure as Governor–more than any other state in the union. Perhaps you thought that eliminating residents of Massachusetts would bring economic health, the way layoffs let you quickly flip a company at a profit in Private Equity? Oh, right, then let’s throw in the health care plan that forces me to siphon off my money to private insurers by buying an inferior policy.
Hats off to you. I hope you run again in 2012. You’ll make a fine President. You can be the second in our new tradition of Presidential Harvard MBAs who have so keenly demonstrated their skill and acumen at making themselves rich, while gutting the organizations they run.