Free Markets, Free People

Daily Archives: March 29, 2010


NOW they tell us…

John Cassidy, writing in one of the blogs at that hotbed of reactionary conservatism, the New Yorker, notes the following about the BFD.  First, he writes that the individual mandate is likely to prompt rather different behavior than the law assumes:

Consider the so-called “individual mandate.” As a strict matter of law, all non-elderly Americans who earn more than the poverty line will be obliged to obtain some form of health coverage. If they don’t, in 2016 and beyond, they could face a fine of about $700 or 2.5 per cent of their income—whichever is the most. Two issues immediately arise.

Even if the fines are vigorously enforced, many people may choose to pay them and stay uninsured. Consider a healthy single man of thirty-five who earns $35,000 a year. Under the new system, he would have a choice of enrolling in a subsidized plan at an annual cost of $2,700 or paying a fine of $875. It may well make sense for him to pay the fine, take his chances, and report to the local emergency room if he gets really sick. (E.R.s will still be legally obliged to treat all comers.) If this sort of thing happens often, as well it could, the new insurance exchanges will be deprived of exactly the sort of healthy young people they need in order to bring down prices. (Healthy people improve the risk pool.)

He then moves on to note that employers may respond in a rather unexpected fashion as well:

Take a medium-sized firm that employs a hundred people earning $40,000 each—a private security firm based in Atlanta, say—and currently offers them health-care insurance worth $10,000 a year, of which the employees pay $2,500. This employer’s annual health-care costs are $750,000 (a hundred times $7,500). In the reformed system, the firm’s workers, if they didn’t have insurance, would be eligible for generous subsidies to buy private insurance. For example, a married forty-year-old security guard whose wife stayed home to raise two kids could enroll in a non-group plan for less than $1,400 a year, according to the Kaiser Health Reform Subsidy Calculator. (The subsidy from the government would be $8,058.)

In a situation like this, the firm has a strong financial incentive to junk its group coverage and dump its workers onto the taxpayer-subsidized plan. Under the new law, firms with more than fifty workers that don’t offer coverage would have to pay an annual fine of $2,000 for every worker they employ, excepting the first thirty. In this case, the security firm would incur a fine of $140,000 (seventy times two), but it would save $610,000 a year on health-care costs. If you owned this firm, what would you do?

I assume that final question is rhetorical.

Too bad no one could explain this prior to the bill’s passage.

If only there was some intellectual discipline that tried to predict how people respond to incentives in a world of scarce resources!


Fighting global warming – the moral equivalent of war?

That’s certainly what I take from a quote attributed to British scientist James Lovelock.  Lovelock is the environmental scientist who developed the Gaia theory.  Lovelock has finally concluded that for the most part humans simply aren’t bright enough to prevent climate change from impacting their lives.

But the biggest impediment, of course, is that pesky thing called “democracy”.  What you and I would call freedom and liberty.  Or as Lovelock would most likely term it, lack of a dictatorship and/or a version of war socialism:

One of the main obstructions to meaningful action is “modern democracy”, he added. “Even the best democracies agree that when a major war approaches, democracy must be put on hold for the time being. I have a feeling that climate change may be an issue as severe as a war. It may be necessary to put democracy on hold for a while.”

That’s mostly because you rather dim humans aren’t buying into what he and the others are selling and we therefore need to have firmer measures enacted. Don’t get excited, it’s for your own good and we promise to return your freedom and liberty to you unchanged, undiminished and unlikely, er, complete. It’s just a temporary little thing, you know, until we get the climate back to where it should be, where ever that is and however long it takes us.

Hmmm … you know, now that I think of it, I have to ask: what is the ideal temperature for humans and “Gaia”, Dr. Lovelock? Seriously – what is the perfect temperature? And when you answer that, tell me when we’ve experienced that temperature as a constant, and how we managed to keep it that way previously? Because, unless I’m mistaken, the climate guys out there have been saying for years that the climate of the earth is in constant and eternal flux. So if you can indeed tell me the ideal temperature Dr. Lovelock (sounds like he ought to be making porn – and in some circles this contention of his that we must put democracy on hold is the moral equivalent of porn) has it been a constant or have we just been passing through that temperature for millennia as we go from natural cycles of warm periods and ice ages?

There are some amazing liberty averse agendas out there. It’s nice to see the green mask finally fully slipping away from the rather deep red face behind it on this particular one.

~McQ


Oh, by all means – tax the banks

And yes, if you’re wondering, I’m being highly facetious with the title.

But that’s the growing consensus among our political leadership – at least that brand of it which believes such taxes are actually paid by the institutions themselves.  And you have to love the reasoning:

The U.S. and European governments are moving toward a consensus on taxing large banks to cover the cost of any future bailouts rather than asking taxpayers to foot the bill, as happened regularly in past banking crises.

The tax proposals vary. Germany and Sweden would use the money to fund a “resolution authority” that would use the money to shut troubled banks whose failure would put the broader economy at risk. Others, such as France, would assess the fee after a crisis passed.

What’s wrong with that, you say? Well anyone – if you’re going to be bailed out and you know it, where the aversion to risk come from? Why not play with other people’s money a little more if there’s no death penalty for doing so? If you are a assured a fail-safe position, why not go for broke?

It seems to provide a perverse incentive to do exactly what you don’t want to see happen.

Our leadership is split on how they should approach it. I bet it doesn’t take you much time to figure out what part of the leadership sides with France’s concept and which would like to see an ongoing tax fund. You’re right, the administration wants to see assessments made after the fact and the Congress prefers a slush fund they can plunder an ongoing fund established (Unsurprisingly Ezra Klein of juicebox mafia fame finds this the most satisfying solution of the two).

Either way, it’s going to cost you money.

And instead of leaving the banks with the threat of punishment by the market for stupid risks (failure), they’ll collect money from you in the form of higher fees and other costs and pass them on to the government so it can subsidize their bad behavior and then wonder why its regulations didn’t work.

Oh, wait, we’ve already wondered about that, haven’t we? I know, let’s make even more regulations.

The core problem? It, like health care, remains unaddressed.

~McQ


Greenspan: Treasury yields “canary in the mine”

Former Federal Reserve chief Alan Greenspan has commented on the recent sale of treasury bonds we commented on here and talked about on the podcast. They have him worried:

Former Federal Reserve Chairman Alan Greenspan said the recent rise in Treasury yields represents a “canary in the mine” that may signal further gains in interest rates.

Higher yields reflect investor concerns over “this huge overhang of federal debt which we have never seen before,” Greenspan said in an interview today on Bloomberg Television’s “Political Capital With Al Hunt.”

“I’m very much concerned about the fiscal situation,” said Greenspan, 84, who headed the central bank from 1987 to 2006. An increase in long-term interest rates “will make the housing recovery very difficult to implement and put a dampening on capital investment as well.

When investors go to bonds, they’re looking for security. If they want higher risk, stocks are ready when they are. What Greenspan is talking about is this:

The Treasury Department sold $42 billion in 5-year notes on Wednesday at 2.605%, higher than traders had anticipated. Bidders offered to buy 2.55 times the amount debt being sold, the lowest since September. That metric of investor demand also compares to 2.74 times on average at the last four sales of the securities, all for the same amount. Indirect bidders — a class of investors that includes foreign central banks — bought 39.6% of the offering, compared to an average of 49.6% of recent sales and the lowest since July. Direct bidders, including domestic money managers, purchased another 10.8%, versus 9% on average. After the auction, yields remained sharply higher in the broader government-bond market as corporate and other higher-risk debt drew investors away from Treasurys. Yields on 10-year notes, which move inversely to prices, rose 13 basis points to 3.81%.

Says Greenspan:

“I don’t like American politics and what’s happening,” Greenspan said.

Historically, there has been “a large buffer between the level of our federal debt and our capacity to borrow,” he said. “That’s narrowing. And I’m finding it very difficult to look into the future and not worry about that.”

Well join the club – I don’t like what’s happening either. Nor do a whole bunch of other Americans. And a clue to our addled leftist friends – it has nothing to do with the race of our president. Instead it has to do with the ideology that he and Democratic leadership are pursuing to the detriment of the country and its solvency.

Back to the line I italicized in Greenspan’s statement. What does it mean? The obvious – continued economic problems, continued high unemployment and slow expansion. The message? The debt is out of hand, and it isn’t being addressed in any meaningful way.

For instance:

The Obama Administration is asking for $2.8 billion to help with ongoing disaster efforts in that Caribbean nation, responding to the devastating earthquake that struck Haiti in January.

“This request responds to urgent and essential needs,” wrote President Obama in a letter sent to Congressional leaders last week. “Therefore, I request these proposals be considered as emergency requirements.”

Let me translate that for you: “Therefore, I request that these amount of money needed for these proposals not be paid for, with the cost of the bill simply added to the deficit.”

That’s what “emergency” spending means in the Congress. It doesn’t go on the yearly deficit figure, but it does get added to the overall federal debt.

Now for those who are going to scream, “but Bush did it with the war”, I agree. Yes, he did it. And doing that was wrong. Clear enough? So whether it is for war or relief, it needs to be “on budget” – that’s if all the nonsense for Obama and the Democrats about PAYGO is to be believed.

Another example:

Last week Democrats in the House approved a $5.1 billion emergency disaster bill to pump more money into FEMA. While there weren’t any pork barrel items attached to that bill, the Democrats did add on a $600 million Summer Youth Jobs initiative, along with $60 million for a small business loan program.

And the $5.1 billion disaster aid had the necessary verbiage to keep it “off budget”.

“EMERGENCY DESIGNATION – SEC. 102. Each amount in this Act is designated as an emergency requirement and necessary to meet emergency needs pursuant to sections 403 and 423(b) of S. Con. Res. 13 (111th Congress), the concurrent resolution on the budget for fiscal year 2010.”

In other words, the cost does not have to be offset.

Unacceptable. Unacceptable when George Bush and the GOP did it. Unacceptable when Barack Obama and the Democrats do it.

They need to understand and be reminded that such avoidance of the PAYGO law requiring new spending be offset by cuts elsewhere is to be followed to the letter. Certainly there may be real emergencies, but the money spent is just as real. If we have emergencies that require immediate spending, then fine – give Congress some time (90? 120 days?) to find the offsets. But this nonsense about whatever they decide to call an “emergency” is off budget – to include wars – has to stop and stop now.

The money spent is real, the debt becomes larger – the fact that politicians pretend it doesn’t add to the deficit is insane and borders on criminal fraud and is certainly no better than Enron accounting.

~McQ


Fantasy? Meet reality …

One of the more persistent myths about the push for universal health care is its provision will solve our medical care problems and improve our overall health.  Well there’s one problem with that – medical care depends on the availability of medical care providers, and we have a shortage of those.  So while everyone may have insurance, insurance doesn’t guarantee access.

Massachusetts offers a snapshot of how giving more people insurance naturally drives demand. The Massachusetts Medical Society last fall reported just over half of internists and 40 percent of family and general practitioners weren’t accepting new patients, an increase in recent years as the state implemented nearly universal coverage.

The entire push of the new law is to shift the country from seeking care when they’re sick to seeking preventive care to help prevent sickness.  That means a shift from primary care physicians who are essentially gate-keepers (to specialists) to primary care physicians as, well, the primary care source for the patient.  One problem – primary care physicians only make up 30% of the physician population.  Couple the shift in emphasis with the addition of 30 million newly insured and you can do the numbers yourself.

So how is this going to be reversed?  Well here’s the plan:

Yet recently published reports predict a shortfall of roughly 40,000 primary care doctors over the next decade, a field losing out to the better pay, better hours and higher profile of many other specialties. Provisions in the new law aim to start reversing that tide, from bonus payments for certain physicians to expanded community health centers that will pick up some of the slack.

Or, in other words, government plans on incentivizing primary care with “bonuses” and essentially deincentivizing specialists.   The obvious hope is some specialists will go back to school and become primary care physicians.  But there’s a culture at work within the physician community which is going to resist that.  The other hope is more will choose primary care in medical school.  Again, that cultural hierarchy will, at least initially, resist that.   The hoped for result is a flock of primary care physicians and far fewer specialists.  Market forces? Ha!  And ignore those doctors who aren’t taking any new patients or are dropping out of the insurance game altogether to charge annual fees for unlimited visits and consultation.

Anyway, the grand plan, once this shift begins taking place, is to take a team approach to your care in something you will lovingly call your “medical home”:

Instead of the traditional 10-minutes-with-the-doc-style office, a “medical home” would enhance access with a doctor-led team of nurses, physician assistants and disease educators working together; these teams could see more people while giving extra attention to those who need it most.

I don’t know about you, but that’s pretty much how my care works now.  I see a PA.  She refers me to my primary care physician only if there’s something out of the ordinary for which his expertise is needed.  Otherwise it is the rest of the team that takes care of me.  The only thing this law changes is the number of people out there seeking this sort of care as far as I can tell – and oh, yes – this system has been in place with my physician for years.  So somehow I’m missing how what they’ve been doing for years has been inadequate, but now that government thinks it is a good idea and it will suddenly take care of all our problems concerning access, and improved care, etc.

Your “medical home” will also include the following.  Now I’m a bit of a student of human nature – but this too seems to be a bit of a fantasy:

Rolling out next is a custom Web-based service named My Preventive Care that lets the practice’s patients link to their electronic medical record, answer some lifestyle and risk questions, and receive an individually tailored list of wellness steps to consider.

Say Don’s cholesterol test, scheduled after his yearly checkup, came back borderline high. That new lab result will show up, with discussion of diet, exercise and medication options to lower it in light of his other risk factors. He might try some on his own, or call up the doctor — who also gets an electronic copy — for a more in-depth discussion.

Tell me – if Don is concerned about such things and willing to search out and consider options to help his condition, don’t you reckon he might already be on WebMD or a similar site right now doing that?  And if Don isn’t likely to do such a thing, is this “custom Web-based service” likely to entice him to log on and do so?

That’s the whole fallacy behind preventive care – it assumes that if it is offered it will be sought out and its recommendations followed – without exception.  The assumption is that Don, who has never followed the advice of his doctor about his cholesterol will suddenly do so because we’ve shifted the emphasis of his care to prevention and provided him access to information.

Really?

And, with the shortage of doctors and increased demands on their time, how likely is Don to really get that “in-depth discussion” he wants from his doctor?  Yeah, not very.  So how likely is Don to get frustrated with all of this and revert to his old and more comfortable (albeit less healthy) lifestyle?  Meanwhile, doc has lots of new patients admitted into the “home” that his “team” is trying to deal with preventively or, doc is simply not taking any new patients because he or she can’t spend the time necessary with those already in the practice.

The point?  As with most things centrally planned, it sounds good on paper.  But such plans tend to discount human nature.  They also tend to be overly optimistic.  And lastly, they usually underestimate or ignore the true numbers involved in favor of some fantasy result where everything works as planned despite those numbers.  That’s what we see here.

~McQ


Independents and key demographics

As I mentioned on the podcast last night, I’ve quit looking at how Democrats or Republicans react to a particular poll. Their reactions are all too predictable. If the Dems are for something by 86%, the Reps will be against it by 90%. Nothing to learn there. Nope, I pretty much zero in on how the independents feel about a particular issue to try to figure out who has the most support. And as I’ve mentioned, more and more the independents seem to be siding with the GOP. That’s not good news for the Dems, no matter what Chuck Schumer thinks.

That brings us to another key to electoral success. Key demographics. We heard so much made of the “young vote” in 2008. They were a key because they actually turned out for once and voted mostly Democratic.  One of the most coveted demographics, however, is that of the elderly – over 65. That’s because they always vote.

So, with that given, let’s take this poll if FL as an example of what’s happening out there.  Yes, it’s a temperature check of the citizens of that state at this time. We all recognize it can change. With that disclaimer out of the way, the usefulness of this poll is found in the information about how independents view recent events.  It also contains info on the key elderly demographic.  For objective observers there are no real surprises.

Florida voters dislike the new healthcare law so much that President Barack Obama and the state’s top Democrat, U.S. Sen. Bill Nelson, are paying a hefty political price, according to a new survey and analysis by Mason-Dixon Polling & Research.

Only 34 percent of Florida voters support the new law while 54 percent are against it, according to the poll. Opposition is significantly strong among two crucial blocs: those older than 65 and voters with no party affiliation. Seniors disfavor the bill by a 65-25 percent margin, while independents oppose the law 62-34.

The poll, conducted last week, is the first to be taken in Florida since Obama signed the healthcare reform bill into law.

If you’re wondering why the president continues to try to sell this thing and why Nancy Pelosi has told Democrats headed out on Easter recess to do the same, this Florida poll gives you a nice indicator. Independents as a whole oppose the bill almost 2 to 1 and elderly independents show the same level of opposition.  It certainly doesn’t appear that the president’s umpteen speeches or the assurances of Congress that this bill is wonderful have met with much success.  Apparently only the Dems bought into the Bill Clinton assurance that everyone would love them once they passed that law.

Why they think that’s going to change if they just push a little harder, especially with the corporate write-downs in the news, is beyond me (and why is Henry Waxman keeping those write-downs in the news with hearings?).

A couple of other results from the poll to mull:

It shows that Floridians have a more negative than positive view of Obama by a margin of 15 percentage points. And they oppose his so-called “cap-and-trade” global warming legislation as well as the new healthcare law.

Why are FL voters opposed to cap-and-trade?

Only 35 percent believe global warming is proved, while 57 percent say it isn’t an established fact. By a 34-50 percent spread, voters oppose the cap-and-trade legislation. And five times as many voters believe it will raise the cost of fuel.

And I have to say I believe the majority to be correct on all counts.

This has had an effect on the numbers for Democratic Senator Bill Nelson as well. His approval rating has dropped a significant 18 points. His only saving grace is he has until 2012 before he must again run. The bad news may be he’ll be on the same ballot as Obama. As for his sudden unpopularity, this was the reaction of his spokesperson:

“If there’s a dip in the polls, it’s due to this inaccurate and unfair bashing for sticking up for these seniors,” McLaughlin said.

Of course it is – and they’re too dumb to know it, aren’t they Mr. McLaughlin? It is that persistent little thread that I see throughout the Democratic reaction (the dumb rubes are being hornswoggled by the slick Republican pitchmen) to bad poll numbers that indicates they’re still deceiving themselves. The old “it’s not the message, it’s the delivery” fantasy that Dems continue to believe.

In the meantime, the polls continue to tell the same tale, over and over and over again.

~McQ

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