Free Markets, Free People

Dale Franks

Dale Franks’ QandO posts

Podcast for 23 Aug 09

In this podcast, Bruce  and Dale discuss the top stories of the past week.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.

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Ducati Execs Do the Right Thing

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It’s no secret that the recent worldwide economic downturn has seriously affected motorcycle sales, sending them plunging by a third.  Now here in the United States, it’s become a common thing to see executives at big firms take huge bonuses, even when the company isn’t doing so hot.  The most egregious example of this was when failed insurer AIG took billions of dollars in Federal money for a bailout of the company, then promptly paid off millions and millions in executive bonuses with it.

Apparently, things are different in Italy, where senior executives at Ducati, faced with slumping sales, did the right thing.

Senior executives at Ducati have taken a 10 per cent cut in their pay and will not receive any bonuses because of the decline, while [Ducati CEO] Mr [Gabriele] Del Torchio said he had taken a 20 per cent pay cut.

Let’s leave aside any legalistic or other arguments about whether the executives should be compensated or not.  At the end of the day, when you’re cutting production, and laying off staff, it seems only right that the pain should be shared by everyone else in the company, all the way to the top.

Kudos to Ducati for setting an example of shared sacrifice.

Podcast For 16 Aug 09

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In this podcast, Bruce, Michael, Lance, and Dale discuss the furor over the Health Care bill, and the sate of the economy.

There is no direct link to this week’s podcast, since my computer went TU right in the middle of it.  You’ll have to listen at BlogTalk radio.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.

Straight Talk on Health Care

We need to face a few facts about health care reform.  Our current system of health care funding is broken.  It’s not broken because we have a free market in health care. It’s broken because we don’t.

Spending in the US health care system is essentially out of control.  The US spends almost 16% of GDP on health care.  Canada, our nearest neighbor, spends a bit more than 10%.  In western Europe, the figure is generally between 7% and 9% of GDP.  It’s something I addressed in my book a few years ago:

Why is spending so much higher in the US, with its supposedly free-market system?  Why is it, with all that spending, that regular medical coverage doesn’t exist for 40 million Americans, when, in the rest of the industrialized world, there is 100% health coverage?

Something is deeply wrong with the financing of the US health-care system.

Part of the problem is that we really don’t have a free market in health care. Individuals, by and large, don’t buy health care policies. Health insurance is employer-provided. In effect, however, this is underwritten by the US government by making health care premiums deductible for businesses, which results in billions of dollars in lost tax revenues. And then, of course, you have to throw in the $300 billion or so that the state and federal governments spend outright to provide health care.  And, of course, once you hit 65, you’re on the government’s health care gravy train, because you’ve got your Medicare, which also covers prescription drugs, now.

Why do we spend too much for health care in the US? The Heartland Institute, a public policy think-tank, has listed several reasons:

1) Government subsidies to health care increases demand by artificially lowering costs.

2) Favorable tax treatment of employer-provided health care has the same effect.

3) Lower-income people without health care must rely on emergency room health care delivery at substantially higher cost.

4) Health care buyers and sellers meet in a “market” that is heavily regulated by the government.

5) State governments increase health care costs by mandating benefit coverages.

6) State governments artificially reduce the supply of health care by requiring Certificates of Need before health care providers can expand services.

7) States interfere with the creation and operation of PPOs by fixing prices or the range of services they can offer.

So, really, we have what is, in many ways, the worst of both worlds. We have a market-based system, but one in which market incentives are minimized through regulation and subsidies. In effect, government policy bids up health care prices, while at the same time interfering with the market forces that keep a lid on prices.

It’s no wonder that more and more people are looking at single-payer, government-provided health care as an alternative to what we already have. At the very least, a single payer system would end the inefficient and fragmented ways by which health care is currently purchased.

This is not a situation we can afford to ignore for long.

We have ignored it, though–although that appears to have come to a screeching halt.

Because of various government intereferences, more than 1/3 of all health care spending is purely administrative.  By contrast, Canada’s administrative burden on health care funding is about 1%.  If we were to switch over to a single payer system, there is an excellent chance that we would, in fact, spend less money on health care than we currently do.

Are there horror stories about health care in Canada or the UK?  Sure.  There are horror stories about our system, too.  For instance, you can find stories of families that were denied coverage, and were forced in to financial disaster all the time.

Canada, of course, has the rather unique problem of being a country with 1/10 of our population being spread over an equal amount of real estate.  In that situation, if you don’t live near a major metropolitan center–and Canada only has about 10 of them, there’s a shortage of available services.  In Britain, there are terrible NHS hospitals, but there are also excellent ones.  But the same it true in the US.  If you live in, say, Houston, Ben Taub Hospital probably wouldn’t be your first choice for treatment.  M.D. Anderson, however, would.

The bottom line, however, is that a single payer system would, in fact, deliver an equal or better level of health care as we currently receive, and probably do so at a lower cost.

But there is a fundamental problem with our current debate.  We are arguing over whether we should keep the system we have, or move to a system that sets us on the path to a single-payer system.  But those aren’t the only alternatives. There is another option that is being lost in this debate.  The democrats don’t want to mention it for ideological reasons.  The Republicans don’t mention it because of…well…incompetent buffoonery, I guess.

The alternative, of course, is to make the case that our current system costs so much, and is so distorted, because of government interference.  We have a mixed system of health care funding in which the government’s intervention imposes a  wide range of unnecessary costs.  So our choice is not to keep what we have, or eliminate the administrative overhead by turning it all over to the government.  The third choice is to return to a free market in health care.

Eliminate state by state coverage mandates, which result in 50 different–and sometimes wildly so–regulatory regimes.  Eliminate federal and state laws that prevent insurers from creating nationwide plans and risk pools.  Eliminate employer health-care coverage, and personalize it, to make it personal and portable.

Here’s another idea:  allow people to buy health insurance.  That isn’t what we have now.  We have pre-paid health care.  The two things are wildly different.  For example, look at how auto insurance works.  Imagine how much your car insurance would cost if we expected our insurance to cover 80% of the cost of oil changes, tire rotation, wiper blades, new tires, regular service, etc.  But that’s precisely what we expect medical insurance to do.  And then we wonder why it costs so darn much.

We need to allow insurers to offer simple catastrophic care coverage, with varying deductibles.  That way, you can pick up the tab for your own doctor’s visits, but you don’t have to worry about bankrupting yourself if some idiot runs a stop sign and knocks you off of your motorcycle.  We need to allow anyone who wants to set up a medical savings account.  Heck, if we really want “the government” to finance it, we could offer a 100% tax credit for health care expenditures.

We don’t need the government to rescue us from the unsatisfactory state health care is in.  We can accomplish the same goals of universal coverage and lower cost, by getting the government out of health care as completely as possible.  There are so many ways we could use free markets to relieve us of the distress the current system of funding is in, that they’re almost impossible to enumerate.

And best of all, doing so would comport with the country’s traditions of freedom, and individual choice.

And one final thing.  With a real free market in health care, if there’s a problem, you’ll also get accountability.  You’ll get access to courts where you can sue a private insurer who defrauds you, or someone who gives you substandard care.  What you’ll get with a single-payer system is no recourse.  If the government turns down your procedure, or you don’t get the health care you should, or if you keel over before your slot on the waiting list comes up, there’ll be nowhere to go, and no one accountable, any more than there is now if the public schools fail to adequately educate your children.

But free market reform doesn’t even seem to be on the table.

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Style Evolves

So, based on some comments throughout the day, I’ve made a revision to the site again.  What I see on my monitor is now red, dark blue, white, and taupe.  I don’t see the “olive green” any more.  If you still see olive green on your monitor, let me know, so that I can do some re-shading.

As far as the column widths go, the main content area is 1000 pixels wide.  A variable width template doesn’t work out for everyone.  Sorry, but that was one of the complaints with the old template, so If you use a really wide screen at 1900px wide, then this is something you’re gonna just have to deal with.

For everyone else, 1000px seems like a good compromise, although I can go wider.  I just don’t want to make people who are still using 1024×768 to have to scroll horizontally to see the whole page.

Style Evolves

Don’t panic!  You’re at QandO.  The only thing that’s changed is that I’ve been a busy little beaver, and have–finally!–changed to a new template designed specifically for QandO, instead of the quick and dirty one I slapped together when we switched to WordPress.

I think you’ll find this one easier to read, and easier on the eyes.

Podcast for 09 Aug 09

In this podcast, Bruce, Michael, and Dale discuss the furor over the Health Care bill.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.

A Fork In the Road is Coming

As most of you know, I served on active duty as a USAF Security Policeman from 1984-1993.  Three of those years were spent in Brunssum, The Netherlands, working on the International Military Police force at Headquarters, Allied Forces Central Europe (AFCENT, now known as AFNORTH).  I noticed an interesting phenomenon while I was there.  As any policeman know, sometimes, you have some unpleasant interactions with members of the community you serve.  In general, those actions end up with you forcing that person to do something the really do not want to do.

In my experience, this type of unpleasantness usually occurred when dealing with a German, or an American.  But there was something interesting about the outcome.  When you forced a German to do something, every time they saw you after that, they would approach with a smile, “Hello, my friend!  How are you?”  It was almost as if they’d discovered during the confrontation where they stood in the pecking order related to you, and henceforth treated you with respect and friendliness.

Americans, on the other hand, didn’t react that way.  Once a confrontation had gone against them, then every time they saw you after that, they’d shoot angry glares at you.  Maybe they’d remark to a friend, “See that MP over there?  He’s a dick.”  Once you’d had that confrontation with an American, you were never going to be friends.

Frankly, Americans resent authority. We accept some measure of it as a necessary evil most times, but there are limits.  We can be pushed, often quite far, but when we reach a certain tipping point, enmity quickly flares.   We can have quite heated arguments as equals, then knock off and have a drink. But once we have a heated argument, then are forced to do something we don’t want to do…well,  we don’t like it.

That piece of our national character is being tried this month.

Over the past couple of days, we’ve seen arguments about national health care erupt into incidents of local violence. Yes, we yelled at each other bit back in 2005 or so, when Social Security reform was on the table.  But now we’re seeing thugs in SEIU T-shirts showing up and throwing punches at people who are gathered to demonstrate against the current version of health care reform. We’ve seen a local Democratic Party apparatchik shove a demonstrator in the face.  Billy Beck has often said it, and now he’s saying it again: “You have always heard it here first: All politics in this country now is just dress rehearsal for civil war.”

At this rate, I’m afraid that it’s going to become painfully obvious that a large number of people in this country are not going to politely doff their caps to the local SEIU grandees, once they’ve learned their lessons like good Germans.  Quite the reverse, in fact.

I’ve also said before–and every time I do, people like Oliver Willis call me crazy for saying it–we’re preparing this country to split apart.  There are two political camps in this country: collectivists, and and indvidualists.  (Forget party labels.  The parties are, at best, loose approximations of those two camps.)  It’s a fairly even split between the two camps. And the fundamental philosophies of those two camps have become irreconcilable, for a number of reasons, but primarily as a  result of centralization of power in Washington.

Of course, the two philosophies have always been incompatible, but in a more federated America, the incompatibility didn’t matter as much.  People in Wisconsin could be as progressive as possible, and no one in New Mexico cared much.  And if people in Wisconsin or New Mexico didn’t like the local political climate, they could just move to somewhere whe the climate was more to their liking. But with the arrogation of so much power by Washington, that’s no longer an option.  In a federal system, nobody in Texas much cares if some yankees in a state far away set up The People’s Autonomous Oblast of Massachussets.  But if Bostonians think that some Alabama ‘seed  in Washington is gonna force them to dance while handling snakes and speaking in tongues…well, you can’t square that circle.

Unfortunately, if the solons in Washington declare we must do X, there’s no way to escape the consequences of that decision.  And so, every political decision is now fraught with national, rather than local consequences. As a result, the incompatibility between collectivists and individualists is reaching a boiling point.  The centralization of power in Washington, and the nationalization of practically every domestic issue, has done nothing but poison our politics, and degraded our political discourse.

This has happened once before in American history.  Between the founding of the country and the 1850s, Slavery moved from an issue of local sovereignty to a national moral issue.  And as abolitionists gained power in both the house–and especially the Senate–it became clear to the Southern states that the abolition of slavery by Congress was inevitable.  Once that happened, given the temper of the times, secession was inevitable as well.

Whether the Civil War was inevitable is a matter of debate.  I tend to think that the peculiar character of Lincoln made it so.  Given a different president, we might have two very different nations–and probably more, in what is now the United States.

By the same token, I don’t believe we are in for a shooting war between the Red and Blue states. Quite apart from the fact that people in the red states tend to be the people with all the guns, there seems to be a declining interest in both Red and Blue states to live under the same political regime.  Blue staters are increasingly uninterested in delaying their march to Utopia by having to make concessions to Bible-thumping, gay-hating hayseeds, and Red staters are not willing to live in a Peasants’ and Workers’ Paradise run by Godless, unborn-baby-killing Commies.

We’re already struggling with the nearly impossible political task of how to reconcile two irreconcilable philosophies under a powerful central government.  Having union thugs show up and deliver beatings and intimidation is only going to raise the anger level among Americans who feel they are being forced to do something they don’t want to do, increase their resentment, and push the country closer to dissolution.

And this won’t be a case like 1860, where 70% of the country successfully forced their will on the remaining 30%.  We’ve got a nearly even 50-50 split between those two philosophies now. We’re too evenly divided to make force an easy, or even viable option.  If things keep going in this direction, then I think we’re on the way to divorce court, where we’ll be citing “irreconcilable differences”.

The Unread Health Care Bill

HR3200, the House’s version of health care reform, can be found here, at the GPO’s web site, in PDF format.  All 1017 pages of it. You’ll need some time to read it.  It’s dense.  Too dense, in fact, for Congressmen to read, apparently.

Or, you can read this PDF file instead, which is a summary of the high points provided by Liberty Counsel, a conservative, pro-life legal firm, which apparently did read it. They reference the GPO’s file directly, so you can quickly track down the references they cite.  A randon selection from the critique:

• Sec. 205, Pg. 102, Lines 12-18 – Medicaid-eligible individuals will be automatically enrolled in Medicaid. No freedom to choose.

• Sec. 223, Pg. 124, Lines 24-25 – No company can sue the government for price-fixing. No “administrative of judicial review” against a government monopoly.

• Sec. 225, Pg. 127, Lines 1-16 – Doctors – the government will tell YOU what you can make. “The Secretary shall provide for the annual participation of physicians under the public health insurance option, for which payment may be made for services furnished during the year.”

• Sec. 312, Pg. 145, Lines 15-17 – Employers MUST auto-enroll employees into public option plan.

• Sec. 313, Pg. 149, Lines 16-23 – ANY employer with payroll $400,000 and above who does not provide public option pays 8% tax on all payroll.

• Sec. 313, Pg. 150, Lines 9-13 – Businesses with payroll between $251,000 and $400,000 who do not provide public option pay 2-6% tax on all payroll.

• Sec. 401.59B, Pg. 167, Lines 18-23 – ANY individual who does not have acceptable care, according to government, will be taxed 2.5% of income.

• Sec. 59B, Pg. 170, Line 1 – Any NONRESIDENT alien is exempt from individual taxes. (Americans will pay for their health care.)

• Sec. 431, Pg. 195, Lines 1-3 – Officers and employees of HC Administration (government) will have access to ALL Americans’ financial and personal records.

• Sec. 441, Pg. 203, Lines 14-15 – “The tax imposed under this section shall not be treated as tax.” Yes, it says that.

It’s actually quite an interesting read, even minus Liberty Counsels alarmist tone and worst-case-scenario suppositions.

The scary thing is…maybe they aren’t being alarmist.

Also, note the tax rates above very carefully for employers who don’t provide health insurance.  If you don’t think those rates are low enough to positively incentivize employers to dump private health coverage and turn it over to the government, then you just aren’t a very astute observer.  8% of payroll is nothing, compared to getting rid of the administrative headaches.

It’s not called “single-payer health care”.  But, objectively, that’s precisely what it is.  Private health insurance won’t be outlawed, of course.  It’ll still be perfectly legal to provide it, or acquire it.  It will just be starved to death under this plan, because employers will stop buying it.  It’ll be easier and cheaper just to push the employees over to the “public option”.

I wonder if our NHS ID cards will have our pictures on them.