Judge Heard What Healh Care Law Did Not Say

It’s ironic that the ultimate fate of the nearly 3,000 page Patient Protection and Affordable Act (PPACA) may hinge on what was not included in the legislation.

Today’s ruling by a federal appellate court judge in Florida that the law’s individual mandate provision is unconstitutional is certainly important, but even more significant is that the judge also ruled that entire law must be struck down on the basis on non-severability. In other words, if a single provision does not pass constitutional muster, then it all gets thrown out.

This is particularly interesting because shortly after the passage of PPACA, it came to light that the law did not include a severability provision, which is a pretty standard clause for most comprehensive legislation. To this day no one really knows for sure the reason for this important omission, although the most likely theory is that it was drafting error made in the rush to pass the legislation.

Then-Speaker Nancy Pelosi famously said that we needed to pass the bill to know what’s in it. Apparently we also needed to pass the bill to know what was not in it.

I have written and commented about this small but important legislative detail frequently over the past year. On more than one occasion someone has challenged me that it is not realistic to think that the entre law could be thrown out even if specific provision were voided by the courts. Conventional wisdom misses the mark once again.

So it’s off to the Supreme Court we go and we’ll see if at least five justices hear what the health care law did not say.

Safewindshields.com

A cracked or broken windshield is a very common driving incident. It can happen at any time and anywhere. It could be a bouncing rock that was kicked up from another vehicle or a blown truck tire that crashes into the windshield. What is even more unfortunate is that it could happen whether you are in town or out of town traveling.

Since a cracked or broken windshield is so common you would think it would be no big deal when and where you get it fixed. However, if you think about it, a windshield is the one major piece of the car that helps to keep you inside a vehicle incase of a head on collision. This could be a matter of life and death and when you put it in that light it becomes a little bit more important to make sure you have the windshield fixed and fixed by the appropriate shops. Auto Glass Replacement Safety Standards Council (AGRSS) works to certify and set stand for glass repair companies. Their website www.safewindshields.com, is a very helpful tool when it comes to getting your vehicle windshield replaced, especially if you are out of town traveling. The top right part of the screen has a “Registered Shop Locator” where you can type in a zip code and find the accredited glass repair shops near your current location. This way, even when you are out of town, you can find a qualified glass repair shop to fix your windshield and know that it will be installed correctly and securely.

So next time you get a rock in the windshield be sure to visit the AGRSS website or call your friendly Fey Insurance Services agent to make sure you get a high quality glass repair shop.

Self-Insurance Faces a Triple Regulatory Threat

SIIA has reported recently on a series of the meetings with DOL and HHS officials to discuss PPACA-mandated studies on self-insurance. Our assumption is that at a minimum there is ignorance among regulators, but more likely a negative bias pervades.

We are working to head off a DOL report that concludes smaller employers should not self-insure due to solvency concerns and a separate HHS report suggesting that self-insured health plans will negatively impact health insurance exchanges due to adverse selection concerns.

While the policy battle rages on these two fronts, self-insurance is now being targeted by a third team of regulators. The Treasury Department has recently developed a keen interest in stop-loss insurance of all things.

The hook for the IRS folks is that the new health care law limits the tax deduction companies that sell fully-insured health insurance products may take for the compensation they pay to their employees. In other words, if a company sells “health insurance,” the company is subject to this tax deduction limitation. And guess what, it looks like the IRS and Treasury officials are confusing stop-loss insurance with health insurance.

Consider the following excerpt from an IRS publication regarding this tax deduction limitation, requesting comments from the public on:

"the application of the deduction limitation for services performed for insurers who are captive or who provide reinsurance or stop loss insurance, and specifically with respect to stop loss insurance arrangements that effectively constitute a direct health insurance arrangement because the attachment point is so low." (See IRS Notice 2011-2).

So, not only are the Treasury officials asking insurance practitioners how they should treat, for example, stop-loss policies, Treasury is explicitly asking for comments on how they should treat these policies, especially policies with a low attachment point.

Interestingly, this was reported to be a hot subject of discussion at an American Bar Association meeting for tax practitioners last week in Florida. Can you picture a bunch of tax lawyers with no background in self-insurance trying to figure out stop-loss insurance? Yep, that’s a scary thought.

But back to the IRS. Should it conclude that stop-loss insurance can be defined as health insurance for even its limited tax treatment purposes, a troublesome precedent will be established. For more than two decades, SIIA has been largely successful in pushing back on state efforts to regulate stop-loss insurance like health insurance.

A contrary interpretation by the feds will likely embolden those who seek to impose new regulations on self-insured plans via their stop-loss insurers. That’s the last thing the industry needs.

So, with stop-loss insurance under a Treasury Department microscope, self-insurance now faces a true regulatory triple threat. Watch for additional updates on this important developing story.

Moral compass: no thanks

Apparently someone has been going around accusing economists of being cold-blooded amoral technocrats. Reptilian people who look at the world and see a set of equations, who throw human life into a cost-benefit analysis and crank out a dollar value. One wonders what could have given them that idea.

But...the pushback is here! Ed Glaeser, a polymathic Harvard economist of great brilliance and reknown, blogs in the New York Times to explain his discipline's moral foundations:

Today, I focus on a larger issue: the complaint that economics is a discipline without a moral core...

[There is] a deep moral tenet – a belief in the value of human freedom – at the core of our discipline.

Some economists made that belief explicit. In the 18th century, Smith wrote, “Every man is, no doubt, by nature, first and principally recommended to his own care; and as he is fitter to take care of himself than of any other person, it is fit and right that it should be so.”

In the 19th century, John Stuart Mill asserted, “The only freedom which deserves the name is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it.”

In the last century, Milton Friedman offered “freedom is a rare and delicate flower” and “a society that puts equality — in the sense of equality of outcome — ahead of freedom will end up with neither equality nor freedom.”...

But don’t think that our discipline doesn’t have a moral spine beneath all the algebra. That spine is a fundamental belief in freedom.

So economics is all about FREEEEEEEEEEEEEEEDOM!!! Well, I guess it was invented by Scotsmen!

Glaeser goes on to say that freedom, in economics, means giving people greater choice:

Improvements in welfare occur when there are improvements in utility, and those occur only when an individual gets an option that wasn’t previously available. We typically prove that someone’s welfare has increased when the person has an increased set of choices.

When we make that assumption (which is hotly contested by some people, especially psychologists), we essentially assume that the fundamental objective of public policy is to increase freedom of choice.

Our opponents have every right to contend that economists are unwisely idolizing liberty, but they err by saying we sail without a moral North Star.

Unfortunately, he doesn't seem to have thought this out very completely:

Economists’ fondness for freedom rarely implies any particular policy program. A fondness for freedom is perfectly compatible with favoring redistribution, which can be seen as increasing one person’s choices at the expense of the choices of another[.]

To quote Peter Venkman of the Ghostbusters: "Excuse me, Egon! You said crossing the streams was bad." (See bolded John Stuart Mill quote above.)

Now, this is only one of many little technical quibbles I could make with Glaeser's assertion (What about the freedom to do things you'll later regret, such as addict yourself to heroin? What about happiness? What if having more choices just makes people upset?). And let's ignore for now the fact that just about 100% of real economic policy issues involve tradeoffs between one person's choice set and another's, making the criterion of "freedom" totally ambiguous. Let's instead step back and ask the question:

Why should a science have a moral core?

Does chemistry have a moral core? Does physics? We may decide that it is morally wrong to explode nitroglycerine in someone's face, but is the scientific fact that nitroglycerine explodes morally wrong in and of itself? Which is to say, should the scientist take morality into account when investigating the properties of nitroglycerine?

(Some people say: "Yes. If you find that nitroglycerine is explosive, you should hide that fact, because if you publicize it, people will probably use nitroglycerine to do bad things." Fine. I won't argue with that (now). But should the scientist refuse to believe that nitroglycerine explodes at all, because the idea of exploding nitroglycerine is contrary to some idea of morality? I am going to just go ahead and say: "No." Hiding a discovery from weapons manufacturers is different than disbelieving it.)

And yet going beyond the facts is precisely what Glaeser's "moral compass" would have us do. Suppose psychologists find that people are less happy when they have the choice to become addicted to heroin. Should economists refuse to accept this fact? If I were an economist studying heroin addiction, I'd say: "Hey, policymakers and voters, here's the deal. If you let people do heroin, their happiness will go down, but they'll have more freedom of choice. I'll let you guys decide what to do."

Glaeser disagrees. He seems to think the economist's duty is either to A) recommend the alternative that entails more freedom of choice, or B) disbelieve the finding that allowing heroin use reduces happiness. (A) is saying that economists, as a class, have a fixed and definite role in deciding society's morality, kind of like a priesthood. (B) is saying that intellectual honesty and scientific integrity must take a back seat to a faith-based belief system.

Whichever he is saying, I highly disapprove.

Morality, as David Hume (a friend of Adam Smith's) liked to point out, is fundamentally a matter of opinion. MY personal opinion is that the role of science is to increase humanity's knowledge, and therefore our power to affect our universe. In a way, this makes my values a bit similar to Glaeser's; I want people to have the option of changing their condition. Whether that option is exercised on an individual or a collective scale is a question I think science should leave to philosophy. If we limit our set of economic theories to those that seem to recommend individual freedom of choice - if we give economics a "moral compass" - we are refusing to take an honest look at the way the world really operates. That, in my moral opinion, is bad science.

And don't think that this doesn't happen in practice. Many of the same economists who espouse a belief in individual freedom of choice are biased against theories that imply a need for collective decision-making. They routinely refuse to believe in the existence of public goods, demand fluctuations, and other phenomena that imply a role for government. Behavioral economic theories, which assert that people are sometimes irrational, are routinely pooh-poohed by "conservative" economists, regardless of the mountain of laboratory evidence in those models' favor.

In short, the widespread belief that economists should act both as scientists and as priests has made them less effective as scientists.

Because when you get right down to it, demanding that economics value individual freedom of choice is denying economists themselves the most basic intellectual freedom: the freedom to doubt. This was famously expressed by the incomparable Richard Feynman:

Our freedom to doubt was born out of a struggle against authority in the early days of science. It was a very deep and strong struggle: permit us to question -- to doubt -- to not be sure. I think that it is important that we do not forget this struggle and thus perhaps lose what we have gained. Herein lies a responsibility to society...

This is not a new idea; this is the idea of the age of reason. This is the philosophy that guided the men who made the democracy that we live under. The idea that no one really knew how to run a government led to the idea that we should arrange a system by which new ideas could be developed, tried out, and tossed out if necessary, with more new ideas brought in -- a trial-and-error system...If we want to solve a problem that we have never solved before, we must leave the door to the unknown ajar...

Our responsibility is to...learn what we can, improve the solutions, and pass them on. It is our responsibility to leave the people of the future a free hand. In the impetuous youth of humanity, we can make grave errors that can stunt our growth for a long time. This we will do if we say we have the answers now, so young and ignorant as we are. If we suppress all discussion, all criticism, proclaiming "This is the answer, my friends; man is saved!" we will doom humanity for a long time to the chains of authority, confined to the limits of our present imagination. It has been done so many times before.

I look at Glaeser's "moral compass," and I hear: "This is the answer, my friends; man is saved!" And I look at my discipline and see a lot of good, honest, doubting scientists struggling uphill against an ossified and institutionalized canon of moral beliefs. And, coincidentally, I see a public that has largely scorned us, mainly because our theories of the macroeconomy have turned out to be useless.

Can we fix those theories while adhering to Glaeser's (implied) dictum that only individual decision-making should be regarded as efficient? Or to put it more crassly: Can we do good science while forcing ourselves to assume that the sun moves around the Earth?


Update: Summoning Feynman to help you is not always a good idea, as this web comic demonstrates...

A Tale of Two Domiciles

This month brought interesting news from two neighboring captive domiciles that portend two different paths in the years ahead.

In Tennessee, Governor Bill Haslam appointed Julie McPeak as the new commerce and insurance commissioner. This is big news for the self-insurance world because not only does McPeak understand alternative risk transfer, she has been an advocate for self-insureds and captives in her capacity as an attorney over the past few years.

Before that, she was the chief insurance regulator for the state of Kentucky and directly contributed to the captive insurance industry taking hold in that state.

Several months ago, then candidate Haslam approached Ms. McPeak to solicit her opinion on how the insurance industry could contribute to economic development in that state. She talked-up captives among other initiatives and apparently her input made a positive impression on the soon-to-be governor.

Tennessee can best be described today as a “dormant” captive domicile because it has a captive insurance statute, but no energy or resources have been committed by either the private or public sector to encourage captive formations in that state.

Ms. McPeak’s appointment has the real potential to change this. Work is already underway to update the state’s captive law to make it one of the most progressive and competitive in the country,

With a favorable law (assuming it can be passed through the Legislature) combined with a regulator who is willing to champion alternative risk transfer solutions, the key ingredients are in place to transform this domicile from dormancy to vibrancy.

Now let’s compare and contrast Tennessee with the nearby domicile South Carolina.

As most industry observers know, South Carolina has seen a reversal of fortune over the last several years as a captive insurance domicile. Its rapid growth and success in the early years has been stalled for some time, largely due to the state’s insurance department, which has increasingly been at odds with the captive insurance industry.

Industry leaders pleaded with newly-elected Governor Nikki Haley to appoint a new insurance commissioner who could restore the state’s status as one of the world’s premiere captive domiciles.

Interestingly, Ms. McPeak’s name had been floated last year as a possible candidate who could rescue captives in South Carolina, but it was obviously not to be.

Instead, Government Haley last week named David Black, CEO of Liberty Life Insurance Company to the post.

Now, Mr. Black does have solid business credentials but he is clearly not an altenative market guy, which means there will be a learning curve about captives at a minimum and no guarantee that he will be an advocate.

This latter point is important because it’s not good enough to be just luke warm about captives. The reason for this is that in order for any captive insurance domicile to grow the bureaucracy must be constantly tamed and that takes top-down leadership imposing a vision of true public-private partnership and demanding results.

The bureaucracy inside the South Carolina Department of Insurance is particularly challenging with regard to the captive application and review process, so the leadership demands are particularly acute.

We will soon see if Mr. Black is up to his challenge. Ms. McPeak is certainly up to hers.

This tale of these two domiciles will continue.

Globalization, unemployment, and inequality

Nancy Folbre makes the claim that globalization has worsened unemployment and inequality:

Why has the economic recovery left workers behind?...

Many journalists argue that globalization is partly to blame for historically low rates of job creation over the last year. Companies in the United States are simply less reliant on American workers – and American consumers – than they once were. Maybe they just don’t need us any more...

Few economists like this argument...

If few economists like this argument, it's not clear why. The opening of the Chinese and Indian markets meant that a huge mass of labor was dumped on the world market, without much capital to go along with it. Scarcity creates value; a relative abundance of labor and a relative scarcity of capital means that wages should fall while profits rise. This is exactly what has happened, so I'm not sure why people are surprised.

This creates inequality, since rich people own more capital than poor people. If there are frictions in the labor market ("sticky nominal wages," for example, which means that it's hard to cut headline wages), this translates to unemployment. The "new global elite" that Chrystia Freeland and others write about are just people who are benefiting from the increased return to capital caused by globalization.

Of course, eventually the capital-labor imbalance should right itself, as China and India build up enough capital per worker that our workers become valuable again. This is, in fact, happening; Chinese and Indian wages are rising rapidly. Of course, China is slowing this process by pumping capital back into the U.S. by buying our Treasury bonds (which they do because that keeps their currency cheap and allows them to maintain steady export growth). But eventually, globalization will run its course and we'll see a resurgence in wages and a fall in profit margins.

Unfortunately, in the meantime, our nation's economy as a whole suffers, because it becomes harder to pay for public services like infrastructure and education. In an age when only a few citizens (capital owners) have money to spare, it's hard to get them to pay for stuff that benefits everyone, as Nancy Folbre points out:

During the 25 years after World War II, the interests of American investors and workers were closely, though not perfectly, aligned. Productivity increases were passed on in the form of higher wages that, in turn, fueled increasing demand for domestically produced goods and services.

Businesses willingly paid taxes to support public programs designed to improve the education, health and security of the labor force on which they relied.

The price of the disruption caused by globalization, she argues, is "increased social conflict, intensified economic inequality and weakened democracy." I find it hard to disagree. And unfortunately, I see little we can do about it, other than to try to rebalance global capital flows by pressuring China to revalue their currency. Even if we succeed at that, though, the basic dynamic will remain the same. Inequality is here to stay for quite some time.

Legal Limits vs. Adequate Limits

Several auto insurance companies are doing a great deal of advertising about keeping you legal for less premium. What does that mean? All states including the District of Columbia, Puerto Rico and the Canadian provinces require you to carry Automobile Liability Insurance with certain minimum limits of coverage. In Ohio those limits are $12,500/person/$25,000/accident for Bodily Injury and $7,500 for Property Damage Liability. In Indiana and Kentucky the minimum limits are $25,000/50,000/10,000. In Wisconsin, for example, the minimum limits are $50,000/100,000/15,000. In some of the Canadian provinces the limit is $200,000. In short, if you carry the minimum required limits in a particular state or Canadian province, you are legally in compliance with that state or province's Financial Responsibility Laws.

But if you are legally in compliance, is that the same as adequate limits of liability protection? In our opinion, higher limits of protection are highly recommended to protect your assets, future earnings and driving privileges. For example, if you rear-end another party and cause serious bodily injury and/or property damage, your minimum limits Auto Policy might initially take care of the other person's medical bills, loss of income and pain and suffering and/or repair their car, but if it is not enough, the injured party could come after you for more. They could tie up your assets, you future earnings, your driver's license and car registration, etc. for long time. Even if you file bankruptcy they could still make it difficult for you to function while you are going through the process.

So what are adequate limits? Unfortunately there is no formula for determining this. With your home you can insure it for the replacement cost of the house using various estimation tools plus discussions with architects and contractors can help you determine the proper amount. There is no such simple formula to determine how much liability insurance to carry, but it is safe to say that Ohio's limits of $12,500/25,000/7,500 are not adequate even if they are legal in the event of a serious automobile accident. We would suggest limits of no less than $100,000/300,000/100,000 or $250,000/500,000/100,000 for your consideration. In addition, if you desire and need higher limits, buying a Personal Umbrella Liability Policy with limits of at least $1,000,000 or higher is highly recommended.

In Fey Insurance’s opinion, the minimum limits of protection imposed by states and the Canadian provinces are a start vs. no insurance at all, but they are not adequate to protect you in the event of a serious automobile accident.

Dregs of the Earth

Someday, the robots will replace mankind. But have they already started to replace the less talented among us? Tyler Cowen thinks so. He hypothesizes that one main reason for our high unemployment rate is that many low-skilled people now have "zero marginal product" as workers - that they have become as useless to our economy as squirrels or pigeons:

Keep in mind, we have had a recovery in output, but not in employment. That means a smaller number of laborers are working, but we are producing as much as before...If I ran a business, fired ten people, and output didn't go down, might I start by asking whether those people produced anything useful?...

There is another striking fact about the recession, namely that unemployment is quite low for highly educated workers but about sixteen percent for the less educated workers with no high school degree...This is consistent with the zero marginal product hypothesis...

Before I say anything about this, I'll let two very experienced economists take the argument apart from a technical standpoint. First, Paul Krugman:

[I]f one factor of production has a zero marginal product, other factors must have very high marginal products, and hence be in great demand. So where are these factors? Is it capital? Then why so much overcapacity in almost every line of business? is it labor with particular skills, or in particular locations? As Mike Konczal points out, basically everyone’s unemployment rate has doubled, no matter their education level or location.

Now, Arnold Kling:

Let us talk about the marginal product of worker i in occupation j. In most cases, this is indeed zero. My marginal product would be zero in fishing, medicine, and many other fields. In a complex economy, if you were to randomly assign workers to jobs, ZMP would be the norm, not the exception. The more complex the economy, the more carefully workers must be assigned in order to avoid ZMP...

[Also,] when a manufacturer has excess inventory, production workers have effectively ZMP. But for the economy as a whole, that is consistent with an aggregate demand story [instead of Cowen's hypothesis]...

The upshot: many conditions in the economy can make it look as if workers are useless, when they really aren't. The mere fact that output has recovered while employment has lagged is not sufficient to conclude that some humans have become obsolete.

But I wonder whether Cowen is really interested in these alternate explanations. In his post, he himself comes up with an alternate story to explain his observations, and then summarily dismisses it. Read carefully:

Garett Jones suggests that many unemployed workers are potentially productive, but that businesses do not, at this moment, want to invest in future productive improvements. The workers only appear to have zero marginal product, because their marginal product lies in future returns not current returns. I see this hypothesis as part of the picture, although I am not sure it explains why current unemployment is so much higher among the unskilled. Is unskilled labor the fundamental capability-builder for the future? I'm not so sure.

So, Cowen starts with the assumption that unskilled labor is not a "capacity-builder for the future", and thus he concludes that...unskilled labor has become useless. This sounds a lot like assuming the conclusion, doesn't it?

Actually, this "zero marginal product hypothesis" is simply a more extreme version of an argument many economists make. The theory of "skill-biased technological change," for instance, holds that inequality is due to new technologies that complement the abilities of high-skilled (read: smart) people, but make the skills of the low-skilled (read: dumb) people unnecessary. In the field of education economics, stagnant college attendance in the face of an increasing college wage premium is often taken as evidence that the people not going to college are simply too dumb to do so (rather than, say, that spaces in colleges are in essentially fixed supply).

These theories all fit into a single basic paradigm: poor and unemployed people are poor or unemployed because of a lack of natural talent, ability, or character. Losers lose because winners are better. Economists who believe this look at the lower classes and see not room for vast improvements, but just a bunch of people doing the best they can, which happens to be not much. This ability-based worldview is so deep-rooted that Tyler Cowen can employ the aforementioned circular logic without even thinking twice.

I just can't buy it. The economy is far too complex to be described as the sum of individuals' actions; we are not simply 6 billion one-person companies each producing widgets in our backyard smelters. If workers' wages always equaled the amount they produced, then thousands of investment bankers would be earning negative wages for the economic destruction wreaked by the promulgation of mortgage-backed CDOs; the fact that those bankers earned billions of dollars then and similar billions of dollars now suggests that something is very wrong. It also suggests that many of the people now languishing in unemployment represent wasted potential - that their unemployment is due to a failure of big complex institutions and mechanisms rather than to their IQs.

Update: Alex Tabarrok, Tyler Cowen's co-blogger, weighs in against Cowen's "Zero Marginal Product Hypothesis":

The ZMP hypothesis is too close to a rejection of comparative advantage for my tastes. The term ZMP also suggests that the problem is the productivity of the unemployed when the actual problem is with the economy more generally (a version of the fundamental attribution error).

To see the latter point note that even within the categories of workers with the highest unemployment rates (say males without a high school degree) usually a large majority of these workers are employed. Within the same category are the unemployed so different from the employed? I don't think so.

Tabarrok For The Win.

From the Wikipedia article on the "fundamental attribution error":

In social psychology, the fundamental attribution error (also known as correspondence bias or attribution effect) describes the tendency to over-value dispositional or personality-based explanations for the observed behaviors of others while under-valuing situational explanations for those behaviors...

As a simple example, if Alice saw Bob trip over a rock and fall, Alice might consider Bob to be clumsy or careless (dispositional). If Alice later tripped over the same rock herself, she would be more likely to blame the placement of the rock (situational).

Tabarrok is quite right. And I would go farther: the "fundamental attribution error" is at the core not just of Cowen's view of unemployment, but of the entire worldview of many "right-leaning" economists.

2010 Discriminations Charges

The US Equal Employment Opportunity Commission (EEOC) recently released some very interesting data for the fiscal year of 2010. 99,922 workplace discrimination chargers were filed which set a new record. The types of claims that were filed where:

Retaliation Charges

Race-Related Charges

Sex Harassment

Disability

Age

National Origin

Religion

Equal Pay Act

Genetic Information Nondiscrimination Act

What is even scarier about this number for business owners is that Commercial General Liability (CGL) doesn’t cover these types of claims. Employment Related Practices claims are excluded under a business CGL. In order to have protection for these types of claims you must purchase Employment Related Practices Insurance. Be sure to talk with your insurance agent today about quoting this coverage for your business.

Do You Blog? Let Your Insurance Agent Know.

The Cincinnati Insurance Board in its January 2011 newsletter posted a great article about the risk that bloggers face. If you blog and or spend time writing in chat rooms on the internet you should contact your friendly Fey Insurance Services agent to discuss. Read why:

Blogging and the Possiblity of Lawsuits- CIB Jan 2011 Newsletter

A growing number of lawsuits are targeting individuals who blog or post allegedly libelous material on the Internet according to the International Risk Management Institute (IRMI). One report indicates a 216 percent increase in libel lawsuits against bloggers and online posters in the last few years.

These postings and blogs can result in nasty lawsuits. For example, earlier this year, a Florida man was sued for $15,000 over a negative remark he posted on eBay against the seller of a reportedly defective clock. A blogger in Georgia was sued for $2 million over his claims about the alleged misdeeds of a local government employee. Are these types of claims covered under a standard, unendorsed homeowners policy? What type of protection, if any, does the homeowners policy offer for these types of lawsuits?

The liability insuring agreement under nearly all homeowners policies pays for damages arising only from bodily injury or property damage, not from any type of personal injury, such as libel. In most cases, the only way that these claims might be covered is if the insured's homeowners policy includes a personal injury endorsement.

So it is a good idea to remind your clients who are active bloggers and online posters of the wisdom of procuring personal injury coverage and a personal umbrella policy (which typically provides even broader personal injury coverage). Clients should also be advised that if the blogging is related, say, to a home-based business, there will likely be no coverage under either of these options due to various business exclusions and restrictions. A home-based business endorsement is essential in these situations.

In addition, you should know that the Internet is not a law-free zone where anything and everything goes. There are ramifications to consider for those avid and active posters and bloggers, ramifications that can turn out to be painful and very expensive

Getting ready for the next American century

Snarky, contrarian pundits have been doing their best of late to come up with reasons why China's rise (and America's accompanying decline) is not as soon as everyone seems to think, or is not inevitable, or is not such a bad thing in any case. Gideon Rachman does an excellent job of taking down these silly folks in a piece in Foreign Policy. Some excerpts:

Americans can be forgiven if they greet talk of a new challenge from China as just another case of the boy who cried wolf. But a frequently overlooked fact about that fable is that the boy was eventually proved right. The wolf did arrive -- and China is the wolf...

The Soviet Union collapsed because its economic system was highly inefficient...China, by contrast, has proved its economic prowess on the global stage...This is no Soviet-style economic basket case.

Japan, of course, also experienced many years of rapid economic growth and is still an export powerhouse. But [t]he Japanese population is less than half that of the United States, which means that the average Japanese person would have to be more than twice as rich as the average American before Japan's economy surpassed America's. That was never going to happen. By contrast, China's population is more than four times that of the United States. The famous projection by Goldman Sachs that China's economy will be bigger than that of the United States by 2027 was made before the 2008 economic crash. At the current pace, China could be No. 1 well before then...

Successive U.S. presidents, from the first Bush to Obama, have explicitly welcomed China's rise...But whatever they say in formal speeches, America's leaders are clearly beginning to have their doubts, and rightly so. It is a central tenet of modern economics that trade is mutually beneficial for both partners, a win-win rather than a zero-sum. But that implies the rules of the game aren't rigged. Speaking before the 2010 World Economic Forum, Larry Summers, then Obama's chief economic advisor, remarked pointedly that the normal rules about the mutual benefits of trade do not necessarily apply when one trading partner is practicing mercantilist or protectionist policies. The U.S. government clearly thinks that China's undervaluation of its currency is a form of protectionism that has led to global economic imbalances and job losses in the United States. Leading economists, such as New York Times columnist Paul Krugman and the Peterson Institute's C. Fred Bergsten, have taken a similar line, arguing that tariffs or other retaliatory measures would be a legitimate response. So much for the win-win world...

In fact, rivalry between a rising China and a weakened America is now apparent across a whole range of issues, from territorial disputes in Asia to human rights. It is mercifully unlikely that the United States and China would ever actually go to war, but that is because both sides have nuclear weapons, not because globalization has magically dissolved their differences.

So, even if they never become as rich per person as we are, China is about to displace the United States as the most powerful country on the planet. This is generally a bad thing for us, especially considering the predatory mercantilism and geopolitical aggressiveness that are accompanying China's rise.

So, the question now becomes: What do we do about this? On the economic front, I agree with Krugman and Bergsten that tariffs are an appropriate tool for discouraging Chinese mercantilism. Pushing them to revalue their currency may bring some of our jobs back, as well as reducing future financial bubbles, but it won't check China's rise or make them less aggressive. For that, we need to deal with the geopolitical threat with geopolitical means. That means forming alliances.

Alliances are the key to national power. Germany and Japan lost World War 2 because Britain and the U.S. managed to ally with the Soviet Union and China; the USSR was stymied in the Cold War in part by the U.S.' alliance with Japan and Germany, as well as (later) China. China is easily big enough to beat the U.S. in any conceivable kind of one-on-one confrontation; hence, we must follow the lessons of history and build a gang that is capable of overcoming China should they make aggressive moves.

Who will be in that gang? The key alliance must be with India, which is the only country with a population to match China's. Japan is another obvious one, given China's antipathy toward and proximity to that country. Smaller Asian countries threatened by China or its proxies - Vietnam, South Korea, Indonesia, and the Philippines - can be important members of the emerging coalition as well. Then there's Russia, which also has reason to fear China's proximity and might, but is always somewhat of a geopolitical wild card; instead of persuading Russia to join us in a China-containing coalition, our best hope is to persuade Russia to adopt a policy of cagey neutrality (thus making China nervous).

These alliances should be cemented by free-trade agreements. If given a choice between sourcing manufactured products from our chief rival vs. one of our allies, we should choose the ally; thus, we should use free trade agreements to bias our foreign investment toward India, Indonesia, Vietnam, etc. and away from China. In addition, creating multilateral free-trade areas between rich allies like Japan and Korea and poor allies like India and Vietnam will form the core of a Pacific alliance that is largely independent of the U.S. - something that we want to promote in any case.

In addition to alliances, the U.S. should be building up its own power. In the short term, that means rebuilding our infrastructure, reforming our educational system, fixing our dysfunctional Senate, controlling health care costs, and raising taxes. In the longer term, it means one and only one thing: immigration. The ability to add population by assimilation of foreigners, coupled with America's large endowments of land and resources, is America's ace in the hole. We can comfortably fit more people on our land than China can on its own; in the long run, this means that we will be more powerful than China or any other country. We should take advantage of our nation's riches and abundant space to bring over immigrants from every corner of the globe, boosting our population and keeping our fertility rates at the safe "replacement" level. What's more, we should focus on bringing over highly skilled and intelligent immigrants, assuring that the U.S. remains the world's research and development center even as manufacturing supply chains move to more densely-populated Asia.

In order to remain a superpower, therefore, the U.S. needs to be a multiracial nation with a multilateral foreign policy. The Tea Partiers' drive to exclude foreigners, and the neoconservatives' (now largely failed) attempt to have America go it alone, are anathema to our long-term national power. These self-defeating conservative impulses must be resisted.

In any case, the American Century is over, and the Chinese Half-Century has begun. Given the facts of population and resources, there is nothing we can do to stop China's rise, but there is plenty we can do to make sure that, if nations are still around by then, the 22nd Century belongs to America.