Worse than Doing Nothing

During this health care debate, it’s become clear that a very large number of Americans are unimpressed with President Obama’s plans for reform. Despite what he and his spokesmen say, it’s hard to believe that we can make things better by involving more government and more money. In fact, I believe that proper reform is actually in the opposite direction. The value is not in hiding away the cost of health care, but actually in removing the middlemen.

Arthur Laffer made this point better than I could in this Wall Street Journal column. Economics is based on the dynamic tension between consumers and producers. The producers want to be able to charge more for the product. Consumers want to pay less. It’s this tension that drives free markets to produce better products at lower, but sustainable, prices over the long term. If you detach either end of this equation, the tension is broken and it begins to break down.

Although we’ve all come to love it, medical insurance itself is part of the problem. We pay a flat fee every month and we’re able to consume as many services as we can get approved for. By removing the patient’s concern about cost, we allow the producer (the doctors and hospitals) to charge more with no immediate effect. Maybe our premiums will go up next year, but that’s too far removed from the action that drove them. If I had to pay for each doctor’s visit, each diagnostic test, and each prescription at full price, I’d become a much pickier consumer. I’d look for better deals. Those providers would have to compete for my money. Services get better and prices go down.

Now, add another level of indirection when the government funds the medical insurance. This means some folks getting free insurance (no cost at all!) with no concern for the cost of the services they consume. When the prices go up in this scenario, the government foots the bill. There isn’t even an increase in premium prices for the patient. How does government solve this problem? By setting prices. They declare they will only pay so much for services. So, the service providers either refuse to accept patients on the government plans or they make up for the lost income by pushing the costs over to those still paying for their own insurance. Which continues to increase those premiums! And, if there are no other kinds of patients (in a single payer system like Canada or the UK), then the fix is to simply ration the care.

Distancing the payer from the service provider causes breakdowns in the benefits of free market economics. The solution here is to bring them closer. Mr. Laffer calls this the wedge. The wedge is the difference between what services cost and what the patient actually pays. The bigger the wedge, the worse the problem. The key is to shrink or remove the wedge.

Thus, health-care reform should be based on policies that diminish the health-care wedge rather than increase it. Mr. Obama’s reform principles—a public health-insurance option, mandated minimum coverage, mandated coverage of pre-existing conditions, and required purchase of health insurance—only increase the size of the wedge and thus health-care costs.

According to research I performed for the Texas Public Policy Foundation, a $1 trillion increase in federal government health subsidies will accelerate health-care inflation, lead to continued growth in health-care expenditures, and diminish our economic growth even further. Despite these costs, some 30 million people will remain uninsured.

Implementing Mr. Obama’s reforms would literally be worse than doing nothing.

Put more emphasis on Health Savings Accounts to give taxpayers a tax-advantaged way to pay for these services, but make them pay for them themselves. Put the costs in front of the consumer and he will begin to shop. When people feel ownership and control of the costs, they will manage the money better than any government agency ever would.

Fantastic Claim

Fantastic can mean “amazing, wonderful, and good” and it can also mean “impossible, beyond reality, and of fantasy”. I’m going for the second meaning here as I discuss the claim by the current White House that massive intrusion of the federal government into health care will reduce costs. That’s fantastic (again, in the “beyond reality” kind of way).

This article in Investor’s Business Daily makes the point cleanly.

The idea of expanding the federal role in the medical arena is truly fiscally irresponsible. The claim that money will be saved through government competition with the private insurance system (with government setting the rules!) is the height of fantasy.

If 45 million Americans are now uninsured, that means 265 million are insured privately, and the government should not disrupt that. If the government becomes the insurer of most Americans, the impact on the budget would be absolutely awesome. Rationing of medical care that is so often mentioned would surely result.

Again, I believe the author is using awesome with a negative connotation.

It seems the height of fantasy to argue that the feds can make something cheaper by trying to control the market centrally. It is the height of arrogance to make that argument with a straight face.

Not Sold

I’m sorry. I just don’t buy it. I read President Obama’s comments from his press conference last night (sorry, I just have a hard time listening to him) and I am shaking my head. The language is sounding near-Orwellian. Just last week, we heard Vice President Biden say this:

“Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’ The answer is yes, that’s what I’m telling you.”

Then, the President said this last night:

This debate is not a game for these Americans, and they can’t afford to wait any longer for reform. They’re counting on us to get this done. They’re looking to us for leadership. And we can’t let them down. We will pass reform that lowers cost, promotes choice, and provides coverage that every American can count on. And we will do it this year.

Now, remember that the President is discussing a plan that, as currently described, will create this (click the image to see it full-size):

House-Democrats-Health-Plan

How does any coherent human being describe an organization like this run by the US government as a way to “lower costs” and “promote choice”? The whole argument is based on the idea that central planning of the entire health care system of this nation will make the system more efficient and more cost-effective. I seem to remember another superpower that thought central planning was the way to go. It didn’t work out for them. I just find it hard to believe that any government agency can cause something to get cheaper. You can’t legislate the laws of economics. The costs have to get paid. Prices only go down when there is choice and competition. Government can only limit choices and lower competition. It cannot artificially improve either one. It’s best bet is to get out of the way and let the market provide the solutions.

When I get this deep into a complex issue, I usually back up and start at the beginning by asking, “What problem are we trying to solve?” It’s easy for the solution to take on a life of its own and lose track of the original problem. So, what is the problem here? Well, according to the President it’s about providing coverage for the “47 million Americans” who are currently uninsured. Who are these people?

Professor Dominick T. Armentano summarizes the myth of the 47 million pretty well here. Let’s turn his numbers into raw math:

  • 47 million uninsured according to the US Census Bureau
  • Approximately 10 million of those are illegal aliens who should not be covered in any case.
  • Approximately 17 million are people making more than $50,000 a year who choose not to purchase insurance. So, it’s not an availability problem, but an issue of liberty.
  • Also, people who lose their jobs are recorded as uninsured, but most individuals changing jobs will regain insurance within four months. This is a temporary situation.
  • Furthermore, there are millions of Americans who qualify for federal or state-offered medical benefits who simply don’t sign up or who are considered uninsured because some government agency is already taking care of things.

Professor Armentano concludes that, with some reasonable estimates, the number of chronically uninsured is closer to 8-10 million. This is roughly three percent of the population. Is it really worth radically disrupting the entire industry and the vast majority of the population that is sufficiently covered to try to gather up that small number? Sure, these are people who need help. Sure, the industry as a whole needs help, but central planning, higher taxes, bigger deficits, more debt, and decreased liberty are not the solution here.

Human nature is to do what benefits yourself. Instead of building a huge bureaucracy to force people to do what isn’t their natural inclination, it is better to make it financially beneficial to do the right thing. Make the payment and the services more closely related. That will cause the patient to shop for the best deal. Remove the danger of a good doctor being wiped out by a lawsuit, and he will make better decisions about what tests and services are necessary and which are not. Further separating the service from the payment will incline people to overuse the services because they feel “free”. That will not lower costs.

The kicker here is the vast damage this kind of legislation can do to the industry. With some legislation, the laws can just be repealed and society can return to its previous state. This legislation will likely drive private insurance companies out of business, or at least change them dramatically. So, even if this monstrosity is repealed, the landscape will be changed and we could be in a world of hurt for some time.

This is something that needs to be prevented now. We can’t afford to “wait and see” and hope to clean it up later.

The Green Tax

So, temperatures have been flat for the last decade. The science supporting the idea of anthropogenic global warming is becoming more suspect. Neither China nor India has any interest in reducing their carbon emissions. So, now is the time to cripple ourselves economically to make ourselves feel good about cutting carbon emissions even though it will have almost no effect. I must be missing something. Why, again, is this imperative? Why is this not a regressive tax?

I loved this take on it by The Tax Foundation:

The Wrong Side

Anyone who has played, watched, or coached a Little League game has seen players just learning the game make some basic mistakes. The players are forgiven, of course, because they are still learning under the tutelage of their coaches. Kids run the wrong direction, forget to throw the ball to first base, or even end up on the wrong side of the field. It’s understandable, really, that in the confusion of one team leaving the field and another team taking the field, that someone can end up in the wrong dugout. This is usually remedied quickly when the player realizes he doesn’t recognize the dugout or the kids standing around him and he’ll bolt across the field as the opposing team heckles and parents in the stand chuckle quietly.

So, what do you do with an otherwise intelligent adult with no teacher or coach who ends up on the wrong side and refuses to admit it? This is exactly what has happened to Barack Obama in regards to the Honduras “coup”. First off, it was not a coup. A coup is a calculated breaking of the law by powers that want to take control. It’s usually followed by a new leader explaining why it was necessary and how the law of the land will change under the new leadership. Traditionally, it’s also been followed by that leader being leader for an indefinite period of time.

In Honduras, it was the government itself that ordered the army to arrest and expel President Zelaya because he was breaking the law and threatening to subvert that country’s constitution. The new leader sworn in to replace Zelaya was the next in line according to their constitution. He is a civilian and has promised to hold elections in November as usual. The army did not install their own leader. The army did not change the law of the land. The army was enforcing the law of the land as ordered by the Supreme Court of Honduras.

Apparently, President Obama has not had this thirty second summary communicated to him and he, almost immediately, condemned these actions and insisted that Zelaya be reinstated. The American public, like parents in the Little League stands, watched the leader of their team (the leader of the free world) running to the wrong side. Obama finds himself making the same demands of Honduras as Venezuela’s Hugo Chavez and Cuba’s Fidel Castro, both anti-American dictators of their countries. He stands shoulder-to-shoulder with thugs and opposes the rule of law in a democracy.

This Washington Times editorial summarizes the situation well and comes to this conclusion:

Whatever the outcome of the crisis in Honduras, Mr. Obama has failed another key test of international leadership. The United States is in an increasingly perilous position in Latin America and needs solid allies to stem the anti-American tide being led by Venezuela. Mr. Obama should think twice before rushing to stand beside the likes of dictators such as Mr. Chavez and Cuba’s Fidel Castro. They support Mr. Zelaya because he is a fellow traveler, a socialist in good standing, a member of their anti-gringo alliance. There’s no reason for America to support him.

In Little League, a coach or parent will encourage the child and suggest a correction for the mistake. Then, hopefully, the child will learn the lesson and not make the same mistake again. Of course, Little League games don’t quite carry the weight of international politics. There are no coaches or parents that have the President’s ear. There are too few critical press outlets that will challenge his decisions and postulate alternatives. So, the public sits in the stands and waits to see what he’ll do next.

Will Mr. Obama realize that he’s on the wrong side and run for the other dugout? Or, not wanting to admit his error, will he defiantly stay on the wrong side only to increase the hidden laughter of his newfound teammates? Or, worst of all, will he remain where he is because he knows exactly what he’s saying and approves? None of these choices present a very impressive picture of this President learning the basic rules of the game.

Update: This article in The Christian Science Monitor is from a citizen of Honduras and only reinforces what we already know. It also has the effect of making President Obama look even more foolish. He starts:

Sometimes, the whole world prefers a lie to the truth. The White House, the United Nations, the Organization of American States, and much of the media have condemned the ouster of Honduran President Manuel Zelaya this past weekend as a coup d’état.

That is nonsense.

And, he concludes with a passion I love hearing:

Don’t believe the coup myth. The Honduran military acted entirely within the bounds of the Constitution. The military gained nothing but the respect of the nation by its actions.

I am extremely proud of my compatriots. Finally, we have decided to stand up and become a country of laws, not men. From now on, here in Honduras, no one will be above the law.

Behind the Times

The only thing worse than someone being intellectually stagnant is someone who is actively running away from knowledge. Apparently, there are quite a few in Washington, DC who are fleeing knowledge in this way. Currently, there are two major bills attempting to move through Congress that would, at best, be serious mistakes and, at worst, be boondoggles that will remake American society in a way that we may not recover from for decades. The health care overhaul is basically an attempt to let the US government become the single payer for all health care in the country. The cap-and-trade bill is an attempt to severely hamstring US industry on the basis of junk science.

Now, the Obama administration will tell you that providing a public option for health care won’t affect your choices. You’ll be able to choose to stay with your current plan (well, that’s not entirely true. If your current plan doesn’t provide the minimum benefits declared by the bill, that plan would have to change.) Of course, if it is cheaper for employers to switch their staff to the public plan, they will do so. And, in doing so, they will remove any options for existing plans. So, Obama qualified himself by saying that the government won’t force you into the public option. That would be your employer’s fault. Never mind that it will be, by far, the most common scenario.

Worse, senators and congressmen have exempted themselves from having to participate in this plan. They get to stick with the impressively sweet deal they already have while the rest of us will be blessed by being better informed so we won’t use treatments that aren’t likely to work. In other words, the government will get to decide if it’s really worth trying that procedure on grandpa. You won’t. How else do you interpret this (from the LA Times):

In a nationally televised event at the White House, Obama said families need better information so they don’t unthinkingly approve “additional tests or additional drugs that the evidence shows is not necessarily going to improve care.”

He added: “Maybe you’re better off not having the surgery, but taking the painkiller.”

In other words, the government will give you better information than your doctor based on what will be cost-effective. So, don’t get sick when you’re old, you may not be worth saving.

Then, on to the environment: the Democrats in the House are hurrying to get a contentious cap-and-trade bill through to limit carbon output over the next several years. Yet again, this bill solves our ills by creating vast bureaucracies designed to control key aspects of the economy and, therefore, aspects of your life. Minority Leader John Boehner created this graphic showing how the bill is intended to work. Let me know when you’ve figured it out (click to see the full-size image):

bureaucraticnightmare

These are serious intrusions into our lives. These will impose huge taxes on each and every one of us (don’t believe the “tax the rich” rhetoric because there aren’t enough of them. Don’t believe the “polluters will pay their share” rhetoric because all companies pass cost increases on to the customer.) This is, flat out, terrible legislation and will cripple our economy when it’s already in a bad way.

Now, the title of this post is “Behind the Times”. I give you all of this information simply to note that we aren’t the first country to try nationalized health care nor are we the first to try to limit carbon emissions. With a fairly simply review of nationalized health care plans in Europe and Canada, it’s easy to see that the result is that everyone has access to sub-standard healthcare. Lines are long. Doctors are fewer. Mortality rates go up (due to the delays and denials of service). Innovation even goes down. This will not only give us bad healthcare, but it will cripple the industry such that it will take years to recover even if the legislation is reversed.

And, in an even more stark case, countries are realizing that cap-and-trade is a terrible idea based on highly disputed science. The Wall Street Journal has an opinion piece by Kimberley Strassel that sums it up. She makes the point that the “consensus” is collapsing:

The collapse of the “consensus” has been driven by reality. The inconvenient truth is that the earth’s temperatures have flat-lined since 2001, despite growing concentrations of C02. Peer-reviewed research has debunked doomsday scenarios about the polar ice caps, hurricanes, malaria, extinctions, rising oceans. A global financial crisis has politicians taking a harder look at the science that would require them to hamstring their economies to rein in carbon.

Strassel tells the story of an Australian legislator who came to America on a fact-finding mission to confirm or deny the need for carbon management legislation. He met directly with President Obama’s special assistant on energy and the environment, Joseph Aldy, and challenged the team to address the controversy. They, apparently, were unconvincing as the Australian went home and voted against the cap-and-trade bill.

Politicians are the only people I know who will passionately pursue a plan even when it has much evidence that it will fail and no evidence that it will succeed. They are fleeing knowledge and end up behind the times.

Reconsidered

Anyone with a passing interest in the global warming debate is aware of the IPCC. This is the Intergovernmental Panel on Climate Change that released it’s findings in 2007. The panel came to the conclusion that it was “very likely” that global climate change is caused by human activity. One of the lead authors even stated:

We can be very confident that the net effect of human activity since 1750 has been one of warming.

Since that time a series of serious criticisms have been made about that report including that idea that governments had an interest in what it said. Much research available to the panel was ignored because it did not fit into the desired narrative. Many of the scientists who did contribute to the overall report were unhappy with the way the summary was written. And, in some cases, the summary conclusions did not even follow from the evidence gathered. The data was collected and analyzed by scientists. The summary was written by bureaucrats and politically-motivated appointees.

On June 2 of this year, another report was released. This one was from the NIPCC (the Nongovernmental International Panel on Climate Change) and titled Climate Change Reconsidered. This group had the major advantage of three more years of published science and no government support to unduly influence its results.

They make a clearly opposing case:

The scholarship in this book demonstrates overwhelming scientific support for the position that the warming of the twentieth century was moderate and not unprecedented, that its impact on human health and wildlife was positive, and that carbon dioxide probably is not the driving factor behind climate change.

The authors cite thousands of peer-reviewed research papers and books that were ignored by the IPCC, plus additional scientific research that became available after the IPCC’s self-imposed deadline of May 2006.

The details are immense, but I challenge any believer in AGW to refute the evidence within. These men and women have taken the common sense that many of us had and backed it up with a vast amount of evidence and study that was ignored because it challenged the “consensus” that never really existed.

I do believe we are seeing the beginning of the end of the cult of AGW. The only challenge now is to make sure the government doesn’t pass anti-global warming legislation before it becomes clear that this is all a hoax. That, in fact, is a real danger that can affect us all for decades to come.

Lies, Damn Lies, and Invented Metrics

Ever since the debate about the President’s stimulus package began, I’ve been bugged by one phrase he and his team keep using. They keep referring to the number of jobs “added or saved” that will result from passing the stimulus. I understand that there are departments in the federal government that track employment numbers, unemployment numbers, hiring numbers, and more. I can see how you can estimate the number of jobs added. I’ve never understood how you can track the number of jobs saved.

The implication here is that these are jobs that would have been lost had the stimulus (or some other program the President is advocating) been blocked. How exactly do you measure that? When I watch sports, I often find myself playing the “what if” game. What if the buzzer beater doesn’t go in? What if that last pitch had been called strike three? What if the officials had called holding on that touchdown play? But, I catch myself because you can’t predict what would have happened. But, this is exactly what the Obama White House is trying to do.

The administration is trying to convince you that they know how bad it would have been and how much better it is now because of their actions. I’ve come to the conclusion that this is nothing more than smoke and mirrors. This is a complete dodge. More knowledgeable men than I have realized the same thing (and much quicker than I did). Here’s Tony Fratto at CNBC:

Here’s an important note to my friends in the news media: the White House has absolutely no earthly clue how many job losses have been prevented because of the stimulus bill. None.

And later in the same article:

There is only one necessary data point to make the “jobs-saved” claim: an accurate measure of expected employment levels in the future. That baseline data is critical to measure what the employment level would be in the absence of the stimulus. Unfortunately for the White House, they cannot possibly know that measurement within any degree of confidence — and they know it.

This whole bait-and-switch is being done to make the stimulus look like a success. It’s a nonsensical statement that’s meant to make the employment numbers look good no matter what. With this formulation, there’s no way to lose! The truth is that unemployment is rising. True, it may be slowing, but it’s still rising. In fact, it’s far worse than the Obama administration ever planned.

This graph (with a description at Innocent Bystanders) explains it all:

stimulus-vs-unemployment-may-corrected

The unemployment rate is far worse than the Obama administration said it would be without the stimulus. Hey, guys, how about we give all that money back and just live with the unemployment rate as is? At least, then, I wouldn’t be worried about the impending inflation problem.

Inflation? Yep, it’s coming. Here’s a quote from Arthur Laffer writing at the Wall Street Journal Online:

With the crisis, the ill-conceived government reactions, and the ensuing economic downturn, the unfunded liabilities of federal programs — such as Social Security, civil-service and military pensions, the Pension Benefit Guarantee Corporation, Medicare and Medicaid — are over the $100 trillion mark. With U.S. GDP and federal tax receipts at about $14 trillion and $2.4 trillion respectively, such a debt all but guarantees higher interest rates, massive tax increases, and partial default on government promises.

But as bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.

Now, fortunately, I didn’t have to deal with finding a job or financing a mortgage in the 1970s, but I know enough to know that it was very bad. It was a cycle of inflation and rising interest rates that kept the economy painfully flat for quite a while. I’m not all that interested in experiencing what my parents did. Of course, now I can document the misery minute-by-minute on the Internet and blog about it here. Hurray.

Counterintuitive

Some aspects of the real world are counterintuitive. By that, I mean things that seem like they should do one thing and then do another. There’s the idea of turning into a skid or large planes staying in the air or how bumblebees fly. These are counterintuitive in observation.

When someone does something counterintuitive, you have to conclude that they are either very smart and have recognized a relationship of which you are unaware or they are rather clueless and have made a bad decision.

President Obama has yet to display any great depth of knowledge about history, economics, or foreign policy. I am not saying that I’m smarter than he is, but he certainly hasn’t convinced me that he’s far smarter than I am. So, it comes to pass that his actions seem counterintuitive to me and, additionally, nobody has been able to explain what it is that I’m missing such that he’s justified in his decisions. In fact, all the evidence points to him either making bad decisions or making decisions for reasons other than what he’s stated. I’ll be generous and just assume he’s performing poorly rather than suggesting he’s deceptive. Although, I suppose that wouldn’t be unusual for a politician.

Next on today’s list of evidence is his effort to impose higher taxes on the foreign profits of US companies. By Obama’s argument, this would prevent companies from sending jobs overseas. In fact, many CEOs are complaining that it would make more sense for companies to move their entire operations overseas, instead.

This Bloomberg article by Ryan J. Donmoyer gives the details. I’ve never been a fan of Steve Ballmer, CEO of Microsoft, but he is in a position that requires he make a profit for his shareholders. Here’s his take:

“It makes U.S. jobs more expensive,” Ballmer said in an interview. “We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”

John Thompson, the Chairman of Symantec Corp. summarizes exactly why companies would want to flee the US.

Thompson called the Obama proposals “counterintuitive” to the administration’s other stated goals of fostering an innovation-oriented economy.

“It is a little bit ironic that most of our most significant trading partners and partners globally have taken the tack that they’ll reduce corporate tax rates to stimulate economic growth and not raise corporate tax rates,” Thompson said.

Once again, it is impossible to tax yourself into prosperity. It’s more than ironic, it’s stupid. I fear that this is an initiative driven by talking points from the left that have not been critically evaluated. Companies will not stand around and have their profits confiscated without doing something to adapt. It’s the unexpected adaptation that will hurt the economy in the long run.

In the Bag

I just wanted to drop a quick note here to happily proclaim David’s junior year complete! With the grading of his final Algebra 2 test last night (on which he scored 100%), school was officially done.

We plowed through Physics, Algebra 2, US History, English, and a semester of Latin all while learning to drive, play the drums, and taking the SAT for the first time. I’d call that a full year of accomplishment.

Way to go, David! We’re proud of you!