’m not sure what else to call it but it does indeed seem a fitting example of a discussion we recently had here about colleges failing to teach critical thinking.
Think Progress (of course) has a blog post headlined with “Income inequality in US worse than Egypt”. Never let a crisis go to waste, huh?
First you are asked to believe that it is “income inequality” which is leading the pack of reasons the country wants Mubarak gone. If not, what’s the purpose of the headline?
Secondly, there’s the equivalence this writer makes between the US and Egypt. My guess Pat Garafalo has never been to Egypt (or perhaps even out of the US to a nation in which “poor” actually means poor) so he has no frame of reference in his comparison. Its all about income inequality, that’s always "bad" and that is the leading reason for unrest, or so the reasoning, such that it is, seems to conclude.
Usually “income inequality” isn’t even on the radar screen when these sorts of things happen. The grievances are more focused more generally on “freedom”, “liberty”, “oppression” and/or “democracy”. You may, as you have in the case of Egypt, even hear “economic opportunity” as a reason.
No, “income inequality” is one of those terms the left likes to use as a sort of euphemism for “capitalist exploiters” – a part of their perpetual war on business. “Capitalist exploiters” include any corporation and most business owners. Of course they can’t use “capitalist exploiters” without revealing their game (and being dismissed out of hand), so “income inequality” has to do. The implication, of course, is if we just took the money from those capitalist exploiters and spread it around (because, you know, those folks collect it and bury it in a coffee can in the back yard or stuff their mattress with it), all would be lovely.
The fact remains that economic opportunity is lacking in Egypt not because of “capitalist exploiters” but because of government oppression and favoritism.
Somehow though, and certainly there are problems with government intrusion here, what has gone on in Egypt is relevant to what is going on here and the proof is “income inequality”. Make the connection for heaven sake – what’s wrong with you?
Garafalo takes a wave at trying to sound fair about his point, but remember, to swallow this whole you have to believe two things – one, that economics is a zero-sum game, so if the rich are getting richer the poor must get poorer and two, there is no opportunity for the poor to better their condition. The rich are just making it worse and worse for the poor by
earning taking more than their “fair share”.
Anyway, Garafalo says:
The Gini coefficient is used to measure inequality: the lower a country’s score, the more equal it is. Obviously, there are many things about the U.S. economy that make it far preferable to that in Egypt, including lower poverty rates, higher incomes, significantly better infrastructure, and a much higher standard of living overall. But income inequality in the U.S. is the worst it has been since the 1920′s, which is a real problem.
Using that, I’d have to guess that the former Soviet Union and it’s bloc of Eastern European satellites had very low Gini coefficient scores, wouldn’t you?
See, this is “equality” for equality’s sake. It’s nonsense. It is the turning of a concept from a positive to a negative. We have all been promised something very profound in the country – equal protection under the law and equal opportunity to pursue “happiness”. Yet it is something the left constantly and consistently pushes as a different message. It doesn’t just want equality in opportunity – it want’s equality of outcome.
That’s why you continue to see long boring posts written about the subject of “income inequality”. It is how the left justifies further intrusion by government and taking from those who “have” to give to those who “don’t have”. It’s about time we made it clear that other than the leftist chorus, no one else is buying into their preaching.
Oh and the big finish to the Garafalo piece?
Yale economist Robert Shiller has said that income inequality “is potentially the big problem, which is bigger than this whole financial crisis.” “If these trends that we’ve seen for 30 years now in inequality continue for another 30 years…it’s going to create resentment and hostility,” he said. But tax and spending policies that provide adequate services and allow for economic mobility — along with a robust social safety net — can head off trouble that may come down the road.
“Bigger than this whole financial crisis”. It will create “resentment and hostility”. There may be “trouble … down the road”.
Have you freakin’ people looked around you and figured out yet how well everyone – in comparison with most of the rest of world – live here? This constant refrain from the left is as tiresome as it is wrong. It’s nonsense on a stick. But you will continue to hear them whine about it for the foreseeable future because it is a way for them to justify taking your money for their purposes and sounding noble about it.
I’d like to say I’m “shocked – shocked I tell you”, but in all honesty I’m not. Rasmussen reports that:
More than one-out-of-four Americans (27%) think the government should manage the U.S. economy, according to a new Rasmussen Reports national telephone survey. Nearly as many (24%) say it’s better for the government to stay out of economic decisions altogether.
First, just off the top, I can’t imagine how 27% can think the government would do a good job managing the economy except via abject ignorance about how the economy actually works. Secondly, if they’re at all literate they must know that some of the worst economic failures as states have been those in which the government managed the economy. And if they follow world events even in passing, they can find current examples of that failure in Cuba, Venezuela, Zimbabwe and North Korea to name a few.
So you’d have to figure they at least have some cognizance of what “government management of the economy” means to hold such a belief, right? If so, then other than faith, what do they base their opinion upon? Certainly not facts – or even success stories.
They remind me of people who begin smoking fully aware of all the awful things that tobacco use will eventually do to them and somehow naively believe they’ll be the exception to the rule. One has to assume they have discovered a way that government management of the economy can work and are simply waiting for the right time to spring it on us all.
Or perhaps they’re just young, inexperienced and enamored with the theory. I guess everyone goes through a period of kumbyah economics where one believes that if everyone would just work hard and share and let a benevolent government manage it all, we’d live in an earthly paradise. But I never thought as many as 27% wouldn’t outgrow that.
Even more disturbing is the fact that more think the government should manage the economy than think it should stay completely out of it. I’ll bet that wasn’t at all the case in the 18th or 19th centuries. In those days our ancestors were of the opinion the less government the better. What a novel thought, huh? And with that freedom they built a nation that is the envy of the world – at least for the time being. Until that 27% have their way.
Seriously though – that number is a bit stunning. 27%. More than a quarter of those polled actually expressed the opinion that we’d be better off if government managed the economy. Does that bother anyone else? And if so, how do you explain it?
27% of our countrymen think somehow government could do a better job managing the economy than markets. Markets which now manage, quite successfully mind you, billions of individual transactions a day in which the two (or more) voluntary participants part perfectly satisfied at the conclusion. How would government do that better? How would it better allocate goods, money, raw materials, etc., than does the market? What signals would it use to satisfy changing demand and ensure the right goods are produced at the right time and sent to the right place for the right price and at a profit which keeps the whole system moving in a positive direction?
I’m asking because I’d love one of the 27% to drop in an enlighten us poor rubes who just can’t seem to wrap our heads around the idea they’re backing in a positive way. Then I’d ask them if they’d prefer Zimbabwe or North Korea to this poor benighted country and its ostensibly “free” markets. Because obviously they can’t be happy here.
Wow … a real head shaker.
Strongman Hugo Chavez says the flooding in Venezuela that has resulted in 70,000 homeless and 32 deaths is easy to understand. It’s the result of “criminal capitalism” and it’s effect on the world’s climate:
"The developed nations irresponsibly shatter the environmental order, in their desire to maintain a criminal development model while the immense majority of the earth’s people suffer the most terrible consequences," he said on Venezuelan television Sunday.
You may be wondering why this sort of stupidity is even worth mentioning. It is worth mentioning because it is a sterling example of the nonsense that has been precipitated by AGW scaremongering that I discuss below. This is a dictator’s excuse, however absurd it sounds, for his regime’s inability to control the flooding in his country.
"The world’s powerful economies insist on a destructive way of life,” he said on Sunday. "And then refuse to take any responsibility."
I’m sure it doesn’t take much imagination to figure out what taking "responsibility" would mean. In the past this would be viewed as another in a long line of failed socialist dictators who, because of their crippling of their country’s economy, have rendered unable to cope with natural disasters. But with the convenient excuse of AGW to pin the blame on, and by extension the richer nations, shifting the blame is a natural.
Any bets as to whether this will be a topic in Cancun?
I noted yesterday that one of the more prolific hacks left off of Alex Pareene list (link in previous post) at Salon was Paul Krugman.
QandO has a long history of examining Krugman’s political thoughts and finding them mostly wanting. That’s not to say he’s a bust at everything he does – when he just talked economics he had some interesting things to say. But his venture into political advocacy has, shall we say, not helped his overall reputation in the least. One of the reasons is he’s prone to saying things like this:
The rich don’t necessarily deserve their wealth, and the poor certainly don’t deserve their poverty.
Don’t “deserve” wealth or poverty according to whom and by what standard, Mr. Krugman?
Who gets to decide what is or isn’t “deserved” if earned or obtained legally? And how does one make the blanket statement that “the poor certainly don’t deserve their poverty?” That, in many cases, is demonstrably false.
If we agree we are the sum of our choices in life, and those who’ve made consistently bad choices (drop out of school, take up drug use, commit criminal acts) end up in poverty, how is it they don’t “deserve” what they now suffer? Certainly I can think of examples of the poor who may be poor through no real fault of their own – the mentally deficient who haven’t the skills to earn high wages, etc. But for the most part, if everyone is offered essentially the same opportunities as others and they choose not to take advantage of them, how does one relegate their descent into poverty as “undeserved”? Especially when others in precisely the same circumstances make different decisions that raise them out of poverty?
What, in fact, that statement is meant to reflect is Krugman’s apparent belief that wealth is unequally distributed not because it is earned, but by an immoral and unfair system that needs to be fixed.
The market, in Krugman’s world, arbitrarily picks winners and losers and rewards them at whim apparently. Thus most of the rich and none of the poor “deserve” their financial status.
So this should come as not surprise:
Allow me to make a point: Economics is not a morality play. It’s not a happy story in which virtue is rewarded and vice punished.
The market economy is a system for organizing activity — a pretty good system most of the time, though not always — but not according to any moral significance.
Really? So nowhere in such an economy is honesty, fairness, good customer service rewarded with business over competitors who exhibit none of those virtues? Instead, it’s just a “system for organizing” where consumers buy from which ever vendor they first come upon without ever once considering those virtues as a reason for buying? Does the system punish those who act in what one could consider an “economically immoral” manner – i.e. in violation of the laws of economics” or screwing over customers? Does it not mostly reward those who act in a manner that most pleases their customers and helps their reputation?
How is that not evidence of a moral code operating within a given market?
Well of course it is – but such a code is inconvenient to the Krugman’s of the world, because admitting that markets, unimpeded by government intrusion, would reward or punish those who transgress its laws would mean the argument for more government intrusion would fall flat. And certainly, admitting that the rich “deserve” their riches as much as many in poverty “deserve” their poverty would again admit to a morality that precluded government making everything “fair” by it’s attempts to redistribute that “undeserved” wealth.
Those key premises are what Krugman and much of the left base their criticism of capitalism on, never once admitting that a) capitalism as it should exist doesn’t and b) the reason the markets may not seem to be “working” is because of the amount of distortion they already suffer from government intrusion.
Of course, it is the age old cycle many of us have come to understand – government declares something to be a problem, declares it is the solution, exacerbates the problem and again declares only it can fix it with even more intrusion.
“Morality” is, at a base level, “good and bad”. We label what we deem “good” as moral. The bad stuff is “immoral”. How one can observe real markets at work, where the basic transaction is a voluntary exchange of goods for money between two people (entities) and not recognize the basic morality of such an act wouldn’t understand morality if it bit them on the leg. Billions of those transactions will happen on this, Black Friday. Consumers will go to stores they trust from experience, buy from vendors with good reputations and the best customer service and reward them with their business. That decision is one based in morality in which the consumer weighs the options and picks the vendor who best exemplifies their moral ideal in the marketplace. If they’ve been burned in the past by store X, that store most likely will not get their business – a decision based on the moral judgment of the consumer.
How a so-called economist doesn’t understand the basic morality of markets seems a bit beyond me. Which is why I put Krugman in the hack category. That morality, which is plainly evident to me, is inconvenient to Krugman’s thesis that government must intervene in the economy. He can’t really point to any success stories (well he tries by saying, finally, that massive government spending for WWII brought us out of the Depression and that’s suspect), so he’s left trying to explain why it is government’s job to save us from the inherent unfairness of the market.
You have to leave a whole bunch of stuff out to do that. And you have to establish nonsensical premises like “the rich don’t necessarily deserve their wealth, and the poor certainly don’t deserve their poverty”, in order to advance your government intrusion thesis.
Thus the cycle repeats – government is again the only solution to the problem government created. After all, the markets put us 14 trillion in debt, not the profligacy of government – or so I fully expect Krugman to explain in some future bit of nonsense in the New York Times. It would make about as much sense as this nonsense.
Your “Econ 101” lesson for the day is a lesson politicians never seem to grasp, although they do love to harp on is “greedy corporations” outsourcing “American jobs”. In effect, they play off of free market decisions necessary to maintain competitiveness in order to characterize corporations as the bad guys (and, naturally, they and government as the white knights).
Of course the market decision I’m speaking of concerns doing what is necessary to remain competitive in highly competitive markets. And, one of the highest costs of production is headcount or the workers. So in a free market, competitive industries are going to seek the lowest cost possible for labor to remain competitive.
That may mean moving to a new country for labor intensive industries where labor costs are lower.
But sometimes it isn’t “greedy corporations” that drive American jobs offshore. Sometimes it is the US Government. Take light bulbs for instance:
The last major GE factory making ordinary incandescent light bulbs in the United States is closing this month, marking a small, sad exit for a product and company that can trace their roots to Thomas Alva Edison’s innovations in the 1870s.
Wait, you say, there’s still a demand for light bulbs! Of course there is – but thanks to government intrusion, that demand, by law, is only for a particular kind – not the incandescent types that we actually manufactured here. Instead of letting the market decide which type of light bulb it wanted, the government decided to mandate it. And what you are now allowed to “demand” is a compact fluorescent, or CFL.
What made the plant here vulnerable is, in part, a 2007 energy conservation measure passed by Congress that set standards essentially banning ordinary incandescents by 2014. The law will force millions of American households to switch to more efficient bulbs.
The resulting savings in energy and greenhouse-gas emissions are expected to be immense. But the move also had unintended consequences.
Rather than setting off a boom in the U.S. manufacture of replacement lights, the leading replacement lights are compact fluorescents, or CFLs, which are made almost entirely overseas, mostly in China.
Consisting of glass tubes twisted into a spiral, they require more hand labor, which is cheaper there. So though they were first developed by American engineers in the 1970s, none of the major brands make CFLs in the United States.
CFLs, as noted, are more labor intensive to manufacture than are incandescent bulbs.
China’s labor costs are far less than the US’s. Therefore, the US government’s mandate ending the use of incandesents by 2014 and mandating CFLs be purchased in their place drove the domestic lighting industry – and the jobs it produced – off shore. And all based on dubious science and the apparent belief that energy production is finite and waning.
Oh, and “how about those green jobs?” Another promise shipped off to China.
When you screw that CFL in some family in China will thank you. And when you pay your taxes some of which go toward unemployment benefits for former light bulb manufacturers here – make sure you thank the politicians for the job well done. I’m sure those former GE workers will.
You could also entitle it "meet the new boss, same as the old boss". What I’m talking about is a recent meeting between UAW bosses and GM workers. To say it didn’t go well would be a vast understatement)(via Sweetness and Light):
Workers at a General Motors stamping plant in Indianapolis, Indiana chased United Auto Workers executives out of a union meeting Sunday, after the UAW demanded workers accept a contract that would cut their wages in half.
As soon as three UAW International representatives took the podium, they were met with boos and shouts of opposition from many of the 631 workers currently employed at the plant. The officials, attempting to speak at the only informational meeting on the proposed contract changes, were forced out within minutes of taking the floor.
The incident once again exposes the immense class divide between workers and union officials, who are working actively with the auto companies to drive down wages and eliminate benefits.
Actively working with the auto companies? They are part owners now of the auto companies – they’re "management" for heaven sake.
Interesting how it suddenly looks when you’re on the "other side", huh? And in the face of vociferous opposition, the UAW officials abandoned the podium.
All of this was written up at the World Socialist website. There’s also a video which gives real credence to the story. In the beginning someone from the local is speaking. He or she (I really couldn’t tell which) then introduces the UAW international drones at about 2:48. As you watch it, it will remind you of some of the townhall meetings of last summer:
The article goes on to say:
Workers at Local 23 voted 384-22 in May to reject reopening a previous contract, which had guaranteed that wages would remain intact in the event of a sale. GM first announced its intention to sell the plant in 2007, threatening to close it if it did not find a buyer.
Despite overwhelming opposition by the rank-and-file, UAW executives secretly continued negotiations with JD Norman, which they outlined in a document sent to workers last week.
Pretty bad when your union which is now management sells you out, isn’t it? To paraphrase one worker, “they’ll still have their jobs while they sell ours out”. Wow – wasn’t that the argument against the hated “management?” Heh …
Irony – it’s really something to be appreciated sometimes, isn’t it? The UAW always wanted control of the auto companies didn’t it? Now it has it – sweet, huh? And private sector unions wonder why their membership is dropping like a rock.
I think this entire article entitled “Why I’m Not Hiring” could qualify as the QOTD. It neatly explains why businesses are so reluctant to hire anyone right now.
Meet Sally (not her real name; details changed to preserve privacy). Sally is a terrific employee, and she happens to be the median person in terms of base pay among the 83 people at my little company in New Jersey, where we provide audio systems for use in educational, commercial and industrial settings. She’s been with us for over 15 years. She’s a high school graduate with some specialized training. She makes $59,000 a year—on paper. In reality, she makes only $44,000 a year because $15,000 is taken from her thanks to various deductions and taxes, all of which form the steep, sad slope between gross and net pay.
Employing Sally costs plenty too. My company has to write checks for $74,000 so Sally can receive her nominal $59,000 in base pay … When you add it all up, it costs $74,000 to put $44,000 in Sally’s pocket and to give her $12,000 in benefits. Bottom line: Governments impose a 33% surtax on Sally’s job each year.
There is no grand revelation in Mr. Fleischer’s explanatory essay. Just hard cold reality: make the costs of hiring more expensive, and less hiring will happen.
Some may argue that just because Mr. Fleischer’s company isn’t hiring for these reasons, that doesn’t mean that other companies are refraining on the same basis. True, but what are the other possible reasons then? Logan Penza summarizes some of the arguments:
It’s those Evil, Greedy Corporations.
That’s the simple explanation most of the talking heads have for the continuing high unemployment numbers. Those Evil, Greedy Corporations horde their money and refuse to hire anyone. When they do hire someone, they don’t pay them enough, don’t offer them enough benefits, don’t pay enough taxes, pollute the planet, steal candy from babies, kick puppies, and make obscene gestures at your auntie. Evil, Greedy Corporations are offered up as cartoon villains, detestable and vile and without any redeeming value.
The trouble with cartoon villains is that they are fictional.
Well, yeah, but it’s so much easier to blame fictional bogeymen then to address what the real businesses say.
Another argument I’ve seen advanced is that the marketplace is inherently uncertain, and that businesses who can’t cope with changes in the law are simply unfit to survive. There is a certain laissez-faire appeal to this argument, but ultimately it doesn’t make sense.
The fact of the matter is that the types of market risk that businesses can and do adjust to, aside from increased competition, are changes in demand and supply, natural disasters and war. The more savvy, efficient and customer-sensitive businesses do survive these sorts of uncertainties and ultimately enhance the economy when they do.
In contrast, when the government continually raises the costs of doing business in the first place (or threatens to do so), the only ones who really survive are either the politically connected or the very wealthy (yes, they are often the same thing). That doesn’t have anything to do with building a better mousetrap, as it were, or growing the economy. And it certainly doesn’t do anything to raise everyone’s standard of living. Instead, all it does is reward those closest to the rule-makers, thus creating more competition to be closest to the King rather than satisfying the marketplace. It is exactly the sort of crony-capitalism we claim to detest.
As Mr. Fleischer summarizes:
A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government’s message is unmistakable: Creating a new job carries a punishing price.
Perhaps instead of punishing business, the government could get out of the way. Maybe then we could get some of that job growth we’ve all been looking for. Unfortunately, it seems that few in Washington are listening, or worse, that they don’t really care.[ad#Banner]
This weekend on on Fox News Sunday, Jon Kyl (rather inartfully) set up a classic struggle between political views of how government economics work:
What’s remarkable about Kyl’s position here is that it appears to be philosophical. “You should never have to offset cost of a deliberate decision to reduce tax rates on Americans,” he said. Never! This is much crazier than anything you hear from Democrats. Imagine if some Democrat — and a member of the Senate Democratic leadership, no less — said that as a matter of principle, spending should never be offset. He’d be laughed out of the room.
Back in the real world, tax cuts and spending increases have the exact same affect on the budget deficit. This sort of comment is how you tell people who care about the deficit apart from people who are interested in exploiting fears of the deficit to shrink the size of government.
While Kyl’s phrasing lends to this sort of demagogic mockery, it’s hard to blame Klein, et al., after the spending binge that followed the Bush tax cuts of 2001. Kyl’s immediate point — that paying for some tax cuts by raising other taxes — is spot on. Shuffling around the types of taxes that one pays makes no sense if the idea is to let Americans hold onto more of their money. Indeed, he made exactly that point after his Fox News Sunday appearance (via Daniel Foster):
“Who does the money belong to?” Kyl asked rhetorically. “The money belongs to the taxpayer, to the people. The money does not belong to the government, and yet that’s what this kind of a rigid paygo rule would assume: that the money belongs to the government, and therefore if you’re going to deny the government some of that revenue through a tax cut, you have to make the government whole, because the government can never lose any money. That would mean that you could never reduce the size of government. Each year, when it gets bigger, it stays at that level or it gets bigger yet, but you can never reduce it.”
As Foster notes, “Kyl is openly advocating some ‘starve the beast’ unfunded tax cuts.” Klein counters this with a reasonable budgetary point: deficits are deficits, whether from reduced income or increased spending. Yet, this misses the real issue:
He who has the money expands; he who does not shrinks.
According to the “starve the beast” strategy, if government takes in less revenue than it spends, eventually it will have to cut spending in order to match revenues, and thus the government will shrink. At the same time, if the private sector has more money in its pocket, the economy will expand. While the efficacy of this strategy leaves much to be desired in practice, at least one part of the equation can’t be denied, i.e. the more money that the government takes in, the more it expands.
The same holds true for the private sector. The fewer taxes it is forced to pay (that is, the more money it is allowed to keep), the greater it expands.
So, the real question is, which do we want to expand: the private sector or the government?
Kyl is dead-on in his describing the pervasive attitude of statists of all stripes. They really think the money belongs to the government and should be dispersed as it sees fit (provided, of course, that government is run by officials suitably attuned to the “common good”). That is where the struggle lies. Statists believe that government is the best source of economic expansion while
history individualists commend the opposite.
If the statists are correct, then we should want the government to expand, and deficits should be run up without commensurate spending cuts or, alternatively, with tax increases. If, instead, the private sector holds the key to economic expansion, then deficits (if any) should be met by spending cuts. Period.
To be sure, in order to live under a rule of law, some minimal level of government spending is required. Ideally, taxes, user fees, etc. pay for that minimal level, but there will always come a time when unfortunate events necessitate dipping into the red. It is in those times when raising taxes may be the best solution on a temporary basis (which hasn’t always worked out very well). Once those events subside, however, continuing to expand government spending can only be done to the detriment of the private sector, which will then shrink.
In the end, whether the electorate chooses an expansion of the state or the private sector will be the real deciding factor in whether the economy expands or not. All deficit spending may be equal in budgetary terms, but only one course will actually serve to expand the economy. On that score, Kyl has the better of the argument.
In all the hype about the McChrystal story and the focus on the Gulf spill, you may have missed this story about Hugo Chavez’s continued destruction of the Venezuelan economy:
Venezuelan army soldiers swept through the working class, pro-Chavez neighborhood of Catia in Caracas last week, seizing 120 tons of rice along with coffee and powdered milk that officials said was to be sold above regulated prices. “The battle for food is a matter of national security,” said a red-shirted official from the Food Ministry, resting his arm on a pallet laden with bags of coffee.
How dare they not heed price controls? Meanwhile, in the ultra-efficient state machine bureaucracy, things are going swimmingly:
Critics accuse him of steering the country toward a communist dictatorship and say he is destroying the private sector. They point to 80,000 tons of rotting food found in warehouses belonging to the government as evidence the state is a poor and corrupt administrator.
120 tons confiscated. 80,000 tons allowed to rot. You can do the math.
“We are bringing order to prices,” Trade Minister Richard Canan told Reuters during the Catia raid. “There are traders who are taking these products to the black market … That is a crime and our government will continue to target these stores.”
Food prices are up 41% this past year. Price controls. If you don’t think you’re paying enough now, try them.
USA Today brings us a story that should surprise no one. Medicare, the supposed model of a government run health care system, is finding that fewer and fewer doctors are willing to take on new patients under that system. They cite the low payments Medicare offers (or perhaps forces) for patient treatment. Baby boomers just now entering the system are going to find their choice of a doctor restricted.
The numbers break down like this:
• The American Academy of Family Physicians says 13% of respondents didn’t participate in Medicare last year, up from 8% in 2008 and 6% in 2004.
• The American Osteopathic Association says 15% of its members don’t participate in Medicare and 19% don’t accept new Medicare patients. If the cut is not reversed, it says, the numbers will double.
• The American Medical Association says 17% of more than 9,000 doctors surveyed restrict the number of Medicare patients in their practice. Among primary care physicians, the rate is 31%.
Note especially that final group. Primary care physicians are the group of physicians that the newly passed health care reform law depends on to implement its “preventive care” regime.
The reason is rather simple and straight forward – Medicare offers 78% of what private insurance pays in compensation for a doctor’s services. Why doctors are leaving or restricting new Medicare patients is rather easy to understand as well:
“Physicians are saying, ‘I can’t afford to keep losing money,’ ” says Lori Heim, president of the family doctors’ group.
Consequently they cut or drastically restrict the source of the loss. While most doctors are not going to turn away existing Medicare patients, they may not accept new ones and finally, through attrition, close their practice to Medicare patients.
It isn’t rocket science – no good businessman is going to continue to do things in which the net result is a loss of money. And a doctor’s private practice is a business – one which employs a number of people. He or she, like any business person running a small business, cannot afford the losses. So they identify the problem and eliminate it.
As this continues it will put them in a direct confrontation with the federal government. It is anyone’s guess, given the current administration’s choices for wielding power, how that will turn out. But what this rejection of the compensation offered by government is doing is bringing to the fore is one of the underlying conflicts of the new health care law – the premise of the law is that government can control costs (and payments) and thereby make medical care less costly. The doctors are saying, go for it, but I’m not playing.
At some point, government is going to have too address those who make that declaration. We’ll then see how free of a country we really are, won’t we?