Healthcare Debate

One of the unacknowledged truths that everyone tries to dance around is that the crisis in health-care costs is the result of government policy. The basic problem is that politicians from both parties (the Freeloaders and the Illiterates) have been promising older Americans unlimited health-care at little or no cost. In addition, they have have encouraged larger corporations to make the same promise to their workers. This has lead to the extravagant over-consumption of health-care by these minorities.

As the cost of this over-consumption has risen, Congress, under both parties, has enacted Medicare "cost cutting." The first round may have actually encouraged increased efficiencies, but subsequent rounds were actually exercises in cost-shifting. Hospitals lost money on treatment of Medicare patients but paid for the extra capacity to provide those treatments by raising prices to non-government consumers. Eventually insurance companies began to demand the same prices as the government was getting. This concentrated the cost-shift on the only group with power to negotiate prices with health-care providers: the uninsured.

Thus we have reached a point where we have a system where poor, mostly minority, people subsidize older, mostly richer, mostly white, people. This does not seem compatible with the supposed ideology of either party. And yet, since Social Security and Medicare remain the "third rail" of politics, both parties are trying to solve the problem without actually changing anything. Remember, it was the Freeloaders, at the urging of the Liberal from Texas, who just a few years ago added the largest expansion of Medicare since the program was launched.

The bad news is that we are likely to get some sort of health-care reform this year or in two years time. The good news is that it will be a colossal failure and will likely result in real health-care and entitlement reform down the road. If we live that long.

Stench of rage

There is a certain moral undertone to being a libertarian. "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness." Libertarians believe in inalienable rights for all men. When you defend your property rights, you aren't being a libertarian. When you defend the property rights of other people, then you are being a libertarian.

The recent plan to tax the bonus money for financial services workers at 90% (leaving 10% for the State of New York) is an outrage. I don't know any workers at AIG or any of the large banks that took the TARP money and if I met them I probably wouldn't like them. But I smell property right being trampled by the government and the stench turns my stomach. I can understand that the Illiterates (AKA Democrats) started the plan but it sounds like the Freeloaders are not objecting to this ludicrous idea (at least not so anyone can hear them.)

Senator Grassley went so far as to say that the AIG workers should commit suicide. I say Senator Grassley should lead by example. Who was the Chairman of the Senate Finance Committee in 2005 and 2006 when most of these CDS were sold? Senator Grassley.

stimulus rant

It is difficult to be a libertarian in an economic crisis. The Freeloaders and Illiterates spew their stupidity everyday. Eventually, you get to the point where you simply have to rant.

Government can not create wealth. Government can transfer wealth; government can destroy wealth; government can, on its better days, create an environment and incentives so that individuals can create wealth. But Government itself can not create wealth.

When overall demand is low, Government should make investments, especially in areas where the costs are lower due to excess capacity. Tax shifts to later generations make no sense when demand is low. People are already deferring consumption; government should lean in the other direction. And do not overestimate what government can do; it can not "restart" the economy; it can not fully make up for private demand. The idea that bankers will suddenly do their jobs better because they are now government employees --well I can't politely describe what that is.

Subsidies

When you subsidize growing corn, you get too much corn.
When you subsidize auto plants, you get too many auto plants.
When you subsidize stupidity, you get too many lawyers and politicians.

It looks like the Freeloader party (AKA Republicans) have managed to extort changes in the "stimulus" bill. The bill coming out of the Senate will have $100 billion dollars in subsidies instead of a like amount of purchases. And other elements of the Freeloader party is attempting to delay even this deal so that the President will not have a bill to sign by Presidents Day (banks are closed for a day and Congress takes the week off.) Meanwhile, the unveiling of the bank rescue plan was delayed by another day (to Tuesday) because it really wasn't all that important.

Placebo Economics

As the Freeloaders (AKA Republicans) and Illiterates (AKA Democrats) pretend to debate the stimulus bill, neither side wants to state the obvious. This package is about half the size  of the Bush stimulus package that was so remarkable ineffective last year.  The total is bigger but the Obama package is spread over two years while the Bush checks were sent over a two month period. And it is abundently clear that the economy is in much worse shape now than it was a year ago. It is true that the appearance of action (and a president who cares that the economy is bad) will probably improve the mood of consumers: This is Placebo Economics.

As I've written before, this economy requires much stronger medicine but given the to and fro about the tiny stimulus package, it doesn't look like it will get it. People have compared this crisis to the "Lost Decade" in Japan after their real estate. While we will probably avoid the worst extremes of inflation and deflation, we may muddle through the middle ground for several years; without the political will and vision to begin to clean up the problems (in all sectors of the economy, not just the banks.)

How much would it cost? It is hard to be precise but $7 trillion seems a reasonable order of magnitude. Even if we wanted to spend that much in one year, I doubt we could get away with it but we could easily spend the next eight years cleaning up for the last sixteen.