Free Markets, Free People


Health Care “Reform”: A Little History Is Always Useful

Daniel Henninger gives us a little walk down memory lane to remind us of the effect of our first attempt at “health care” reform.

Back before recorded history, in 1965, Congress erected the nation’s first two monuments to health-care “reform,” Medicaid and Medicare. Medicaid was described at the time as a modest solution to the problem of health care for the poor. It would be run by the states and “monitored” by the federal government.

The reform known as Medicaid is worth our attention now because Mr. Obama is more or less demanding that the nation accept another reform, his “optional” federalized health insurance program. He suggested several times before the AMA that opposition to it will consist of “scare tactics” and “fear mongering.”

Whatever Medicaid’s merits, this federal health-care program more than any other factor has put California and New York on the brink of fiscal catastrophe. I’d even call it scary.

Anyone who has paid any attention to the health care debate know full well that Medicare and Medicaid have become huge black holes with future funding obligations in the tens of trillions of trillions of dollars.

Now, pointing that out and doubting the government’s ability to do any better is apparently “scare tactics” and “fear mongering”. Reminds me of the AGW nonsense.

After 45 years, the health-care reform called Medicaid has crushed state budgets. A study by the National Governors Association said a decade ago that because of “new requirements” imposed by federal law — meaning Congress — “Medicaid has evolved into a program whose size, cost and significance are far beyond the original vision of its creators.”

There is nothing to convince anyone that the same won’t happen with a “public option”. And although the present plan is to have such an option pay for itself through premiums, there’s nothing to stop Congress from deciding the taxpayer should pick up the tab at some point in the future.

In his speech, Mr. Obama said the cost of the Public Option won’t add to the deficit: “I’ve set down a rule for my staff, for my team — and I’ve said this to Congress — health-care reform must be, and will be, deficit-neutral in the next decade.” If we’re honest, that means tax increases are inevitable.

The thing to remember – “deficit-neutral” doesn’t necessarily mean cuts in spending. It means that revenue must equal spending and that obviously means that spending increases must have added revenue – tax increases.

There is some resistance starting to form to the “reform”. The Democrats plan on rushing this through with limited debate. If they succeed, “Son of Medicare” will wander out the government lab and bankrupt this nation much more quickly than now anticipated.


Conference on Health Care Reform

Cato Institute is hosting a conference on health care reform today that will be webcast live. It will feature the following speakers:

* Rep. Paul Ryan (R-WI)
* Rep. Michael C. Burgess, M.D. (R-TX)
* Rep. Jason Altmire (D-PA)
* Karen Davenport, Director of Health Policy, Center for American Progress
* Douglas Holtz-Eakin, Former Director, Congressional Budget Office, and Director of Domestic and Economic Policy for the McCain presidential campaign
* Tom G. Donlan, Barron’s
* Karen Tumulty, Time Magazine
* Susan Dentzer, Health Affairs
* John Reichard, Congressional Quarterly

This represents a wide range of views and promises to be much more interesting and informative than the White House/ABC News infomercial scheduled for next week. so if you’re interested in this topic at all, take some time to check it out.

U.S. Spurns Aid To California. Really?

In one of those “make sure you read the whole article” stories in the Washington Post, it begins like this:

The Obama administration has turned back pleas for emergency aid from one of the biggest remaining threats to the economy — the state of California.

Top state officials have gone hat in hand to the administration, armed with dire warnings of a fast-approaching “fiscal meltdown” caused by a budget shortfall. Concern has grown inside the White House in recent weeks as California’s fiscal condition has worsened, leading to high-level administration meetings. But federal officials are worried that a bailout of California would set off a cascade of demands from other states.

If you read no further than that, you’d probably think, “thank goodness, a modicum of sanity has returned to the federal government”. It is California’s mess and California, along with the other states, need to learn a hard but necessary fiscal lesson here.

But, while perfectly correct in your assessment, you’d be wrong to think that the present rejection is final. Buried a few paragraphs down is this:

These policymakers continue to watch the situation closely and do not rule out helping the state if its condition significantly deteriorates, a senior administration official said. But in that case, federal help would carry conditions to protect taxpayers and make similar requests for aid unattractive to other states, the official said. The official did not detail those conditions.

I’m sure he or she didn’t. This is another Geithner plan based in the premise that California is “too big to fail” – the 8th biggest economy in the world and its failure would slow down the economic recovery of the US.

Given that inclination on the part of Geithner, it would appear that nothing has been learned from the Chrysler and GM bailouts, failure and eventual bankruptcies. Granted, California’s “failure” would be quite a bit larger than those two, but haven’t we yet learned that propping up a unsustainable business or government model just doesn’t work?

While it may be painful for both California and the US, nothing changes in California unless massive cuts and changes are made in that government. And, as has been evident to even the most tuned out of constituents, the California government model has been unsustainable for over a decade.

Naturally, California wants to characterize their plight in the way that will appeal the most to the emotions:

“After June 15th, every day of inaction jeopardizes our state’s solvency and our ability to pay schools and teachers and to keep hospitals and ERs open,” Gov. Arnold Schwarzenegger (R) said Friday.

But the hard fact remains that the solvency of all those institutions are in jeopardy with or without a bailout. We’re simply talking about how long we want to extend the problem not how to solve it. Solutions mean massive cuts in government spending and resultant reductions in government services. Or said another way, California is finally going to have to live within its means or fail.

That’s not a condition the rest of the taxpayers in this country brought about, and it certainly isn’t one they should be on the hook to “bailout”. And that goes for every other state in that condition as well (see the article and its mention of how Treasury is thinking about doing something with auto suppliers in Michigan – is that the job of Treasury).


Obama’s Visit With The AMA

I‘m not sure what part of this Obama doesn’t understand.

On the one hand, he told doctors at the AMA convention yesterday that he was not a fan of tort reform and felt that limits on malpractice cases was a disservice to those who were truly injured.

On the other hand he made this case:

Not long ago, doctors’ decisions were rarely questioned. Now they are being blamed for a big part of the wasteful spending in the nation’s $2.5 trillion health care system. Studies have shown that as much as 30 cents of the U.S. health care dollar may be going for tests and procedures that are of little or no value to patients.

The Obama administration has cited such findings as evidence that the system is broken. Since doctors are the ones responsible for ordering tests and procedures, health care costs cannot be brought under control unless they change their decision-making habits.

Somehow, apparently, he doesn’t understand the linkage. But AP’s Ricardo Alonso-Zaldivar thinks there’s a much more basic reason than Obama not understanding the linkage:

If Obama announced support for malpractice limits, that would set trial lawyers and unions—major supporters of Democratic candidates—on the attack. Not to mention consumer groups.

Somebody has to go under the Obama bus and the apparent choice is doctors.

USA Today led its story about Obama at the AMA convention with this:

President Obama told wary doctors Monday that the nation’s health system is “a ticking time bomb for the federal budget” and said those who call his plan for a taxpayer-funded coverage option a step toward a government takeover of health care “are not telling the truth.”

Of course the one “not telling the truth” in this case is President Obama. Any “public” option funded by taxpayers is not going to be competing on the same level of the playing field as private insurance carriers. Right now there are 1,300 private choices out there. The introduction of a taxpayer funded “public” option will, according to many economic and health care experts, end up seeing employers dump private health care coverage in favor of public health care coverage and eventually see the system become a single-payer public plan.

That’s why there is such fierce opposition to this sort of an option. Even those in favor of the public option know it is a means to single payer and willingly admit it. So to have the President stand up in front of a group of doctors and tell the whopper he told yesterday is disappointing but not unexpected. He’s lowballed the cost, he’s dissembled about how it is going to be paid for and now he’s being totally disingenuous about the eventual end-state a public option would bring.


“Lose” An Election, Go To Jail

It’s kind of hard to protest an election in court when you’re in jail.

Iranian presidential candidate Mir Hossein Mousavi was reportedly arrested Saturday following the reformist’s defeat at the polls by hardliner Mahmoud Ahmadinejad.


Mousavi’s arrest was reported by an unofficial source, who said that the presidential contender had been arrested en route to the home of Iran’s supreme leader, Ayatollah Ali Khamenei.

My guess – and that’s all it is – is this is a move to defuse the protests. It will also remove the last bit of the veneer from the belief that these were “free and open” elections. In some ways this makes Iran easier to deal with. There’s no longer any doubt that it is a totalitarian regime where no “robust debate” is taking place or possible.

Look – the fantasy that these were “free and open” elections was a sham to begin with. 475 people applied to run for the presidency. 4 were approved by the ruling mullahs. That should tell you all you need to know about this election. Even Mousavi had impeccable revolutionary credentials, or he wouldn’t have been one of the 4.

But the election appears to have taken an unexpected turn. It would seem those that voted for Mousavi and perhaps Mousavi himself, took it a little more seriously than the authorities expected. Supporters turned out in record shattering numbers (85% of eligible voters) to vote and simply aren’t buying this supposed “landslide” win the mullahs and IRG had put together to keep their guy in office.

Crude, certainly, but to be expected. Authoritarians don’t believe in the democratic process – never have. But they understand the power of popular approval – even if they have to fake it and fake it poorly.


The Coming World Of Obamacare and AGW Taxes

Nothing makes it clearer than a real world examples. From socialized Canada:

The Lower Mainland’s health authorities will have to dig more than $4 million a year out of their already stretched budgets to pay B.C.’s carbon tax and offset their carbon footprints.

Critics say the payments mean the government’s strategy to fight climate change will further exacerbate a crisis in health funding.

“You have public hospitals cutting services to pay a tax that goes to another 100 per cent government-owned agency,” NDP health critic Adrian Dix said.

“That just doesn’t make sense.”

Heh … it would really be funny if it wasn’t so absurd or headed in our direction like a runaway freight train.

Enjoy those “little green shoots” of growth, because they’re going to be as dead as the Mojave desert if “health care reform” and “cap and tax trade” are passed.

And don’t even try to throw the “these people have your best interest at heart” canard out there either:

Dix warned that some of the potential cuts – such as closing the ER at Mission Memorial Hospital – would actually increase carbon emissions by sending patients further afield.

“Obviously when you shut down regional centres it makes people travel farther to get to their health care facility,” he said.

Vancouver Coastal chief financial officer Duncan Campbell said his health authority believes the payments are appropriate and isn’t asking for any exemption from Victoria.

“For us to go back and ask for an exemption wouldn’t fit in well with our green care plans,” he said.

IOW, your health is secondary to their sacred green mission.

Freakin’ amazing. And yes, it is entirely possible you’d be treated the same way here when government controls health care and is collecting on “cap and trade”. Remember, it was Obama who said he didn’t believe in cap and trade exemptions.


[HT: Wm Teach, RWN]

Health Care: “Special Interest Democracy”

It may be hard to believe [/snark], but it appears when Democrats speak of “fairness” they define it in their own special interest kind of way.

Take the talk about taxing your private health care benefits (something adamantly opposed by Obama during the campaign).

Originally it was going to be everyone. But other Democrats complained mightily to Senate Democrats who were considering such a tax to pay for the conservatively estimated 1.5 trillion necessary to pay for “health care reform” (PAYGO? HA!). So they modified it a bit – tax the “rich” – those who had the best of coverage. Always a popular populist fallback, Sen. Dems were sure that would work.

Alas it was soon discovered that a huge number of those holding “Cadillac” health care policies were unions. Yes, the special interest group in the pocket of the Dems (and vice versa) would be heavily hit by such a tax. As you might imagine, they were not happy.

Solution – drop this bad idea?

Of course not. Instead exempt the unions, you silly person:

Mr. Baucus officially floated his plans for a tax this week, only with a surprising twist: His levy will not apply to union plans, at least for the duration of existing contracts. In other words, Mr. Baucus intends to tax the health-care benefits only of those who didn’t spend a fortune electing Democrats to office. Sen. Ted Kennedy, who is circulating his own health-care reform, has also included provisions that will exempt unions from certain provisions.

The union carve-out is designed to allay the fears of many Democrats who remain outright hostile to a tax on health-care benefits, whether out of principle, political fear or union solidarity.

This is not your grandfather’s America. Pay czars who arbitrarily set arbitrary pay limits based on what they “think” (according to presidential spokesperson Robert Gibbs) is “fair”, a government appointed CEO for an auto company who admits he knows nothing about cars and the government hijacking of health care.

If you’re not concerned, you’re not paying attention.


Miranda and War

An interesting discussion broke out in the comment section of the Miranda post, which I’m hoping will continue. The primary issue (and I’m simplifying here) centers around just how detainees caught on a battlefield should be handled if they don’t fit the established parameters of soldiers under the Geneva Conventions. Although there appears to be agreement that reading detainees Miranda rights is a step (or three) too far, there is also wide agreement that we should be skeptical about allowing our government so much latitude as to hold anyone indefinitely. I think closing the gap on those parameters is the challenge to be met, but I don’t think it is possible to do so without understanding how war differs from law enforcement.

Clausewitz defined war as “continuation of policy with other means.” The crux of his definition is that “war” is simply a tactic used to further political goals. War is not waged as end in itself, but as a means towards other ends which, for whatever reason, could not be accomplished through non-violent tactics. There are always exceptions, of course, but certainly a rational state will not expend blood and treasure when the same goals can be accomplished without. Even an irrational state, with irrational goals, will not waste such resources if it understands that it does not have to.

The other tools in the box for continuing policy include diplomacy and capitulation. Once those are deemed exhausted or unacceptable (as the case may be) then the tool of war is likely to appear. In other words, if agreement cannot be reached between erstwhile enemies, and surrender by one side or the other is not acceptable, then actual battle will be necessary to decide whose policy will be continued. At that point all manner of understanding between the parties is dead and only victory or a credible threat thereof will allow the discarded tools to once again be used in the construction of policy.

In the absence of war, there is general agreement as to how competing parties will conduct themselves in the pursuit of their policies. Citizens may vote, senators may argue, special interests may agitate, and whole nations may barter. The agreements may deal with how citizens deal with one another, how governments deal with their citizens, or how violations of the agreements are handled (i.e. law enforcement). In the modern world those general agreements are reduced to treaties, constitutions, rules, regulations and the like, all of which may be considered law. The policies themselves may also be enacted into law, but without some understanding as to the mechanisms for peacefully deciding which policy will be followed, then war is the only tool available. A rule of law, which is only useful where there is broad agreement on it, obviates the need to use war to advance policy. All of the foregoing are the hallmarks of a civil society that depends on pursuing policies through peaceful tactics. To turn Clauswitz’s definition around, law is the continuation of war by other means.

To be sure, transgressors of law will be dealt with at times in violent ways, but there is at least a tacit agreement to the law’s authority to do so where the violator is operating from within the society and generally partaking of its benefits. If enough transgressors get together then the agreements have broken down, and civil war or revolution may occur. Therefore, war can be understood as the tactic that is used when the law has ceased to be of use. More simply, war is the absence of law.

Given the above, which is nothing more than a condensed version of my personal views on the subject, it is difficult for me to understand how legal concepts can be introduced into war. Opposing factions may agree with one another to fight under particular rules of engagement, or to treat enemy prisoners a certain way, but when those rules are broken there is no legitimate authority to enforce them. The Geneva Conventions represent a more elaborate attempt to impose limits on warfare, but even those were never intended to apply to non-signatories except in very limited circumstances (pre-Hamdan anyway). More importantly, it seems obviously ludicrous to apply laws outside such limited agreement to any of the parties involved in battle, because there would be no battle if such laws were being adhered to in the first place.

So while any number of parties may agree amongst themselves to fight under self-imposed rules, that does not give any of them authority to impose those rules on others. Furthermore, except where explicitly agreed to otherwise, such rules would not govern war between a party to such an agreement and a non-party. To look at it another way, if Mike Tyson and Evander Holyfield agree to fight under certain sanctioned rules, that does not mean that either fighter must adhere to the same rules if attacked by a third party on the way home from the match.

Accordingly, in a world of asymmetrical warfare, the basic principle that “war is the absence of law” seems to apply. In this context, the very idea of approaching war with terrorists in foreign countries under a rubric of law intended to govern domestic life appears absurdly out of place. Treating detainees captured on the battlefield to the luxury of legal niceties intended to protect the very citizens those terrorists seek to harm defies all logic. And pretending that reading any of them Miranda rights will do anything more than hamper our ability to defeat these cretins is an exercise in serious delusion. In short, law is a manifestation of the agreements underlying a peaceful community, and war is the means of protecting those agreements from those who seek to subvert them.

When considering just where the line should be drawn then, between reading enemies their “rights” and allowing the government to detain them indefinitely, I think it’s useful to understand that we are not really talking about a “rule of law.” Instead, we are talking about how best to utilize the tactic of war in furthering our policy of not allowing crazed radicals to murder our citizens. While I find great merit in placing the government (i.e. our instrument of war) on a firm leash, I don’t think it is at all useful to conflate the means by which we protect ourselves from an overbearing government with the means by which the government protects us from enemies bent on our destruction.

Sometimes A Picture …

Is definitely worth a thousand words.

Or a chart.

Arthur Laffer is not amused:

Here we stand more than a year into a grave economic crisis with a projected budget deficit of 13% of GDP. That’s more than twice the size of the next largest deficit since World War II. And this projected deficit is the culmination of a year when the federal government, at taxpayers’ expense, acquired enormous stakes in the banking, auto, mortgage, health-care and insurance industries.

With the crisis, the ill-conceived government reactions, and the ensuing economic downturn, the unfunded liabilities of federal programs — such as Social Security, civil-service and military pensions, the Pension Benefit Guarantee Corporation, Medicare and Medicaid — are over the $100 trillion mark. With U.S. GDP and federal tax receipts at about $14 trillion and $2.4 trillion respectively, such a debt all but guarantees higher interest rates, massive tax increases, and partial default on government promises.

But as bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.

And what have those “panic-driven monetary policies” brought us? Well, first the picture:ed-aj638a_laffe_ns_20090609175213

The chart is certainly no laffer.

Remember, we’re being told by “experts” (*cough* Krugman *cough*) that we’ll be able to handle this with no problem, really, if we just manage it properly. A tweak here, a tweak there and bingo – no inflation.

Hmmm … let’s get a little context here, shall we?

The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10 (see chart nearby). It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless. The currency-in-circulation component of the monetary base — which prior to the expansion had comprised 95% of the monetary base — has risen by a little less than 10%, while bank reserves have increased almost 20-fold. Now the currency-in-circulation component of the monetary base is a smidgen less than 50% of the monetary base.

So that means that what? Well Laffer goes into a good explanation of bank reserves and how they function, etc. etc. – bottom line, banks are going to be loaning a bunch of money, thereby injecting liquidity into the marketplace.


With the present size of the monetary base, and …

With an increased trust in the overall banking system, the panic demand for money has begun to and should continue to recede. The dramatic drop in output and employment in the U.S. economy will also reduce the demand for money. Reduced demand for money combined with rapid growth in money is a surefire recipe for inflation and higher interest rates. The higher interest rates themselves will also further reduce the demand for money, thereby exacerbating inflationary pressures. It’s a catch-22.

And what does that mean could happen? Well again, we’re in uncharted territory, but the last time we had anything even similar, eh, not so good:

It’s difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed’s actions because, frankly, we haven’t ever seen anything like this in the U.S. To date what’s happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits. Gold prices went from $35 per ounce to $850 per ounce, and the dollar collapsed on the foreign exchanges. It wasn’t a pretty picture.

Yeah. I remember it well. And here we are again – on steriods. So now what?

Per Laffer, the Fed must contract the money supply back to where it was plus a little increase for economic expansion. And if it can’t do that, it should increase the reserve requirement on banks to soak up the excess.

But Laffer doubts that can or will be done:

Alas, I doubt very much that the Fed will do what is necessary to guard against future inflation and higher interest rates. If the Fed were to reduce the monetary base by $1 trillion, it would need to sell a net $1 trillion in bonds. This would put the Fed in direct competition with Treasury’s planned issuance of about $2 trillion worth of bonds over the coming 12 months. Failed auctions would become the norm and bond prices would tumble, reflecting a massive oversupply of government bonds.

In addition, a rapid contraction of the monetary base as I propose would cause a contraction in bank lending, or at best limited expansion. This is exactly what happened in 2000 and 2001 when the Fed contracted the monetary base the last time. The economy quickly dipped into recession. While the short-term pain of a deepened recession is quite sharp, the long-term consequences of double-digit inflation are devastating. For Fed Chairman Ben Bernanke it’s a Hobson’s choice. For me the issue is how to protect assets for my grandchildren.


Yes friends – we’re in the best of hands. I’m just wondering how the present administration is going to attempt the blame shifting when the inevitable happens.


Quote of the Day

It comes from James Delingpole of the UK Telegraph:

Modern China cares about as much about “anthropogenic global warming” as Chairman Mao did about providing his population with five-course steak dinners. AGW’s only use, as far as the Chinese are concerned, is as an ingenious device to suck up money and power from the gullible west.

There is the truth that “must not be spoken”. That is the bottom line and anyone who has followed this “debate” and hasn’t been able to discern precisely what Delingpole states as the truth hasn’t been paying attention.

China is not, let me repeat that – not – going to jeopardize its economic growth over something it flat doesn’t believe to be a problem. But it will seize every opportunity to “negotiate” free money and technology from the west – if we’ll pay for it, they’ll take it.

And the naive bunch we have running the show now, despite unheard of deficit spending, are more than willing to do precisely that – just watch.