Free Markets, Free People

Daily Archives: June 9, 2009


Revitalizing GM

The government seems to be working on a cunning plan to bring GM back to profitability.

This ought to do it.

With auto sales in the doldrums, the House was considering a plan Tuesday to provide vouchers of up to $4,500 for consumers who turn in their gas-guzzling cars and trucks for more fuel-efficient vehicles.

The House proposal, set for a floor vote Tuesday, was aimed at stimulating car sales during a bleak period for the auto industry and increasing the nation’s fleet of cars that get more miles to the gallon…

Separately, House and Senate appropriators were discussing providing $1 billion to a supplemental war funding bill for the “cash for clunkers” program, which aims to generate about 1 million new auto sales. Since the yearlong vehicle program is expected to cost $4 billion, lawmakers would attempt to find the additional money later this year.

Under the House bill, car owners could get a voucher worth $3,500 if they traded in a vehicle getting 18 miles per gallon or less for one getting at least 22 miles per gallon. The value of the voucher would grow to $4,500 if the mileage of the new car is 10 mpg higher than the old vehicle. The miles per gallon figures are listed on the window sticker.

So, now we’ve got a car company, and next we’ll be buying cars for our neighbors.


Eternal Truths?

In 1942 a Presbyterian minister named William J. H. Boetcker issued these 10 statements (they’ve at times been incorrectly attributed to Lincoln):

1. You cannot bring about prosperity by discouraging thrift.
2. You cannot strengthen the weak by weakening the strong
3. You cannot help the poor man by destroying the rich.
4. You cannot further the brotherhood of man by inciting class hatred.
5. You cannot build character and courage by taking away man’s initiative and independence.
6. You cannot help small men by tearing down big men.
7. You cannot lift the wage earner by pulling down the wage payer.
8. You cannot keep out of trouble by spending more than your income.
9. You cannot establish security on borrowed money.
10 You cannot help men permanently by doing for them what they will not do for themselves.

Those all seem pretty self evident don’t they? Yet we seem to be engaged, at very high levels of government, in going against every one of them and thinking (at least among those pushing the agenda) we can succeed in making life better.

~McQ


Health Care – “The Public Plan”

Ezra Klein discusses what has commonly become known as the “public plan” in the emerging “health care reform” legislation. Put simply it is “public insurance” which is supposed to compete with the private insurance industry and, as Paul Krugman claims, keep them “honest”.

Klein lays out the various flavors being floated out there concerning this option:

• The “Trigger” Plan: Olympia Snowe is pushing this compromise, as are some conservative Democrats. The basic idea is that the public plan would act as an invisible threat: It would be “triggered” into existence if the private insurance market was unable to offer, say, enough options in a particular region, or enough cost control. In addition, the public plan would only come into existence in this or that region, or this or that state. It would be effectively useless as an insurer. It could potentially have some competitive effect in that private insurers would still work to avoid its existence. Some have argued, however, that the conditions being mentioned in the “trigger” proposals have already been met.

• The Weak Public Plan: This is what people are talking about when they refer to a “level-playing field.” This incarnation of the public plan — first proposed by Len Nichols at the New America Foundation and later echoed by Peter Harbage and Karen Davenport at the Center for American Progress — would have no special advantages over private insurers. It couldn’t use the low rates that Medicare sets or access taxpayer subsidies. It couldn’t force its way into networks. It would simply be another insurer, albeit with different incentives than traditional insurers.

• The Strong Public Plan: This would be like Medicare for the rest of us. It could throw the federal government’s weight around. It could negotiate deep discounts with providers. It could muscle its way into networks. Outside groups like the Commonwealth Fund estimate that it would save the average consumer 20 percent to 30 percent. That would give it a massive competitive advantage over private insurers, and would probably result in tens of millions of Americans dropping their current coverage and entering the public plan to save money. A variant of this was in the draft of Ted Kennedy’s bill that was leaked last week.

While Blue Dog Democrats have come out in favor of the “trigger” option, liberals such as Klein and Krugman prefer the “Strong Public Plan” for the reasons stated (massive dropping of private insurance for “public” (i.e. government) insurance). And there’s a reason they both prefer that – they see it as a backdoor way to move health insurance to a single payer system.

And that is a distinct possibility with both the “strong public plan”. In fact it is a design feature. The “competition” touted would most likely be in name only as Greg Mankiw explains (quoting Krugman to set up his explanation):

What’s still not settled, however, is whether regulation will be supplemented by competition, in the form of a public plan that Americans can buy into as an alternative to private insurance.Now nobody is proposing that Americans be forced to get their insurance from the government. The “public option,” if it materializes, will be just that — an option Americans can choose. And the reason for providing this option was clearly laid out in Mr. Obama’s letter: It will give Americans “a better range of choices, make the health care market more competitive, and keep the insurance companies honest.”

It seems to me that this passage, like most discussion of the issue, leaves out the answer to the key question: Would the public plan have access to taxpayer funds unavailable to private plans?

If the answer is yes, then the public plan would not offer honest competition to private plans. The taxpayer subsidies would tilt the playing field in favor of the public plan. In this case, the whole idea of a public option seems to be a disingenuous route toward a single-payer system, which many on the left favor but recognize is a political nonstarter.

If the answer is no, then the public plan would need to stand on its own financially and, in essence, would be a private nonprofit plan. But then what’s the point? If advocates of a public plan want to start a nonprofit company offering health insurance on better terms than existing insurance companies, nothing is stopping them from doing so right now. There is free entry into the market for health insurance. If a public plan without taxpayer support would succeed, so would a nonprofit insurance company. The fundamental viability of the enterprise does not depend on whether the employees are called “nonprofit administrators” or “civil servants.”

The bottom line: If the goal is honest competition in the provision of health insurance, the public option cannot do much good but can potentially do much harm.

That is a critical point in this debate – there isn’t an insurer out there that has as deep pockets as the US Treasury. If there is public money backing the public option, then the talk of “competition” is a sham. It is being used to placate and fool those who oppose a government takeover of insurance, the result which would surely happen if what Mankiw’s concerns are true. And if you follow the reasoning process that Mankiw has laid out above, it should be pretty darn obvious what the intent of this “public plan” really is, all the happy talk Klein and Krugman throw out there notwithstanding.

Last, but not least, while the “strong public plan” is an obvious short-cut to single-payer government run health care, the other two plans simply delay that same eventual outcome for a while. While there are certainly reforms that could be made in the insurance industry and health care generally, anyone who believes that government can do it a) better and b) more efficiently has simply not been paying attention to the shape government finances are in right now or how large the deficit has grown as it has mismanaged its entitlement empire to this point.

~McQ


Part 3: Whelan Figures It Out …

And apologizes to Publius for doing something he shouldn’t have done and can’t undo:

On reflection, I now realize that, completely apart from any debate over our respective rights and completely apart from our competing views on the merits of pseudonymous blogging, I have been uncharitable in my conduct towards the blogger who has used the pseudonym Publius. Earlier this evening, I sent him an e-mail setting forth my apology for my uncharitable conduct. As I stated in that e-mail, I realize that, unfortunately, it is impossible for me to undo my ill-considered disclosure of his identity. For that reason, I recognize that Publius may understandably regard my apology as inadequate.

Publius responds:

Ed Whelan has written both publicly and privately and apologized. I know it was not an easy thing to do, and it is of course accepted. I therefore consider the matter done, and don’t intend on writing about it anymore.

Hat tip to Whelan for apologizing and making it public. That took some courage.  And to Publius for the gracious acceptance. Lesson?

You don’t get to decide whether or not the privacy concerns of another are legitimate (unless very specific types of exceptions are extant – “shouting fire in the theater” type) – that’s why we talk about privacy rights. It appears Whelan has finally figured that out.

~McQ

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