Health Care Reform: Essential Economic Insights

COGAN, HUBBARD, & KESSLER:

According to provisions in both House and Senate bills, mandated plans must have low copayments and provide coverage of health-care services that is at least equal in scope to a typical, current employer-sponsored plan. But these are the very flaws that are responsible for high and rising health-care costs, flaws that stem directly from the misguided tax exclusion for and the extensive state regulation of health insurance. By locking in these flaws, the mandates will inhibit precisely the innovation needed to reform U.S. health care....Comprehensive, low-deductible, low-copayment insurance has brought us to where we are today. The administration's plan to expand and lock-in this flawed paradigm will ultimately defeat the goal of making health services more affordable for everyone.

If one wants to use government and public policy to "solve" a "problem," then it seems to make good sense to first understand the cause of the "problem." These 3 economists understand the sources of the health care problem today are past government policies. Thus, government actions today that do not correct the past bad government policies, even more that lock in the past bad policies, should not be expected to lead to better results in the future.

[HT: Greg Mankiw]

Of Entrepreneurs & Philosophers

LUDWIG VON MISES:

It is not the business of the entrepreneurs to make people substitute sound ideologies for unsound. It rests with the philosophers to change people's ideas and ideals. The entrepreneur serves the consumers as they are today, however wicked and ignorant. [Human Action, p. 297]

Consumers Captain Economic Ship

LUDWIG VON MISES:

The direction of all economics affairs is in the market society a task of the entrepreneurs. Theirs is the control of production. They are at the helm and steer the ship. A superficial observer would believe that they are supreme. But they are not. They are bound to obey unconditionally the captain's orders. The captain is the consumer. Neither the entrepreneurs nor the farmers nor the capitalists determine what has to be produced. The consumers do that. If a businessman does not strictly obey the orders of the public as they are conveyed to him by the structure of market prices, he suffers losses, he goes bankrupt, and is thus removed from his eminent position at the helm. Other men who did better in satisfying the demand of the consumers replace him." [Human Action, p. 270]

Intergenerational Injustice

Pajamas TV offers an interesting look at the intergenerational impact of the national government's recent bailouts and stimulus.

If you are college age or younger this is must viewing.

If you are an adult with children, you may also be interested in viewing, but maybe you will be even more interested in trying to keep this away from your children. Why?

Consider that when I followed this link I discovered that I can expect to pay about $276 per month until I die for the bailouts and the stimulus. That will be a total of only about $76,000 because of these government actions. In contrast, my son, who is now 9, will pay about $285 per month across all the years that he is a federal income taxpayer. My son's total payments for bailouts and stimulus, this time around, will be about $154,000 over his lifetime. Of course, this is only a small part of the impact of today's government policies on my son since it calculates nothing for the impact of social security, medicare, health care "reform," etc., etc., etc.

I think this illustrates pretty nicely why I follow Thomas Jefferson in concluding that government debt is intergenerationally unjust. My son is still quite a number of years away from voting age, and by the policies of our government we are binding him to pay for our own bailouts and stimulus.

Obama & His Taxes

WSJ REVIEW & OUTLOOK:

"President Obama didn't make much news on his round of five Sunday talk shows yesterday, with one notable exception. The President revealed a great deal about his philosophy of government and how he defines a tax increase. It turns out the President thinks a health-care tax is not a tax if he thinks the tax is for your own good."

Yeah, I know. I'm very lucky the President is looking out for my own good.

The Wages of Government

THE WSJ REPORTS that:

"A group of blue-chip companies is lining up behind efforts to voluntarily change their pay practices, in part to head off potentially more onerous restrictions out of Washington. . . . .

Many of the Conference Board's principles resemble those of the Obama administration, including tying a 'significant portion' of incentive compensation to a company's long-term success, rather than rewarding short-term gains that some worry promote risky behavior. The proposal also calls for doing away with certain pay practices, such as 'overly generous golden-parachute payments' in the event of a takeover, and long-term employment contracts that require generous severance payments."

I suppose rhetoric is a beautiful thing, at least to some. I would like an explanation as to why it makes sense to say a group of companies will voluntarily change their pay policies when at the same time these companies are trying to placate government.

It seems to me more accurate to say that "a group of companies are being coerced by government to change their pay policies." And, if government passes legislation or writes regulations about pay policies, then it would seem accurate to say that government has forced companies to change their pay policies. Or, if we would prefer to match rhetoric with more rhetoric, how about we say instead that "a group of companies have decided to give into to the big government bully." I think my use of coercion and force is more accurate, but telling the story in terms of the "big government bully" might help tell a story with more political traction.

Check out the paragraph that lists some of the proposed changes. I've read this entire news article, and I don't think I can find any analysis that explains why it is thought that these companies have bad pay policies now. So, I have no way to judge whether these changes make any sense. What's more, it seems to me that any company's pay policies should seek to achieve the company's purposes, and not the purposes of government.

Oh, and I wonder how "generous" is defined?

Finally, since we are considering the responses of business to the coercion of government, is it completely silly to ask where Congress or President Obama constitutionally have the power to coerce, or to force, businesses to change their pay policies? I can't see that they do in the Constitution I have.

Never Merely Consumer

Ludwig von Mises:

"Living and acting man by necessity combines various functions. He is never merely a consumer. He is in addition either an entrepreneur, landowner, capitalist, or worker, or a person supported by the intake earned by such people." [Human Action p. 253]

Hmm, where does the politician fit? Or, has Mises neglected to include politician in his list of various functions?

Happy Constitution Day!

If you would like to celebrate our constitution, then I have a suggestion. Check out the POLITICIAN'S PLEDGE at the 10th Amendment Center. Take a look around while you are there. I like the looks of the center. While you are there, consider clicking on "Petition" and letting your representatives know what you think about the constitution and our government.

ObamaCare: Would I lie to you?

GREG MANKIW:

"At first, it sounds like the President is threatening to veto the bills being considered in Congress because, according to CBO, they will add significantly to deficits in the out years. If true, that would be a big story. But the provision he mentions in the next sentence seems to suggest he is just passing the buck.

Translation: 'I promise to fix the problem. And if I do not fix the problem now, I will fix it later, or some future president will, after I am long gone. I promise he will. Absolutely, positively, I am committed to that future president fixing the problem. You can count on it. Would I lie to you?'"

Chinese Tire Tariffs & The President

WSJ:

"The White House leaked word late Friday evening that the U.S. will impose heavy tariffs on imported Chinese tires used by millions of low-income Americans. We wonder if President Obama understands the political forces he's unleashing with this blatant protectionism.

[ . . . ]

As a candidate, Mr. Obama courted union support, and the United Steelworkers filed the tire case anticipating he would pay them back. Some in the business and policy communities thought Mr. Obama didn't really mean it, and that like Bill Clinton he would stand for the national economic interest in open trade once he became President. Mark that down as another misjudgment. In his first big trade test in the White House, Mr. Obama has allied himself with the protectionists, and the world will see his political surrender and rush to exploit it."

Well, I guess that's okay since I like paying higher prices for tires.

Obama's Takeover of Student Loans

WSJ:

"The furor over President Obama's trillion-dollar restructuring of American health care has left his other trillion-dollar plan starved for attention. That's how much the federal balance sheet will expand over the next decade if Mr. Obama can convince Congress to approve his pending takeover of the student-loan market.

The Obama plan calls for the U.S. Department of Education to move from its current 20% share of the student-loan origination market to 80% on July 1, 2010, when private lenders will be barred from making government-guaranteed loans. The remaining 20% of the market that is now completely private will likely shrink further as lenders try to comply with regulations Congress created last year. Starting next summer, taxpayers will have to put up roughly $100 billion per year to lend to students."

I guess "ObamaCare" has been used as shorthand for "health care reform." But, maybe we should start to see "ObamaCare" as President Obama's view of government, i.e, Obama's government is one that cares for all our needs.

The Age of Liberalism

LUDWIG VON MISES:

It is a purposeful distortion of facts to blame the age of liberalism for an alleged materialism. The nineteenth century was not only a century of unprecedented improvement in technical methods of production and in the material well being of the masses. It did much more than extend the average length of human life. Its scientific and artistic accomplishments are imperishable. It was an age of immortal musicians, writers, poets, painters, and sculptors; it revolutionized philosophy, economics, mathematics, physics, chemistry, and biology. And, for the first time in history, it made the great works and the great thoughts accessible to the common man. (p. 155)

Cap & Trade

Sounds like the climate bill has stalled.

President To Speak To Your Kids On September 8

PRESIDENT OBAMA is going to speak to all the nation's school kids on September 8. What do you think about that?

I think the President is a politician, and this President seems to think he is pretty special and awe inspiring. So, of course, if the President asks the nation's youth to study hard, then I'm sure they will. But, because the President is a politician I'm afraid this is truly intended to be another one of his political events. I may be wrong. I think this is a very bad idea because it seems like something from one of the other counties in the world which has little use for individual liberty. Then again, a President who thinks redistributing wealth is good seems not to have high regard for individual liberty to begin with. Maybe the recent election is some measure of how far this country now falls short of holding liberty in high regard?

If you click through on the link above you can find another link to "resources" to help teachers figure out what they should teach their students about the President's address to them. Here is one of the suggestions for talking with students before his speech:

"Why is it important that we listen to the President and other elected officials, like the mayor, senators, members of congress, or the governor? Why is what they say important?"

Let me take a stab at answering. It is important to listen to those in government because they are the men and women who use force in our daily lives. Government uses force in our lives properly when it functions basically as the "protective state," which means it uses force to enforce private property rights and voluntary contracts, and it means government uses power and force to protect us from attack by people living in other countries of the world. It is important to listen to those in government because it seems these days that most of the people in government do not understand this. Instead, most of the people in government today support public policies that use force in ways that are predatory on activities of all of those outside of government who every day try to do the best for themselves and their family by being productive. Therefore, it is important to listen to those in government because if we don't pay close enough attention (and remember the old adage "watch what they do, not what they say"), then those in government will become ever more successful predators and the prosperity we enjoy today will be foolishly lost to ourselves and the very kids the President will speak to next week.

How many kids do you think will offer this answer? I think not very many because it seems to me our schools are no longer very good at teaching a curriculum for a prosperous republic.