Free Markets, Free People

Health Care

Krugman: The “Nipponisation” of the World

After a lot of partisan “happy talk” about how the Obama administration is handling the economic crisis here, Paul Krugman goes on record saying the world is doomed to suffer Japan’s lost economic decade on a global scale.

The thing about Japan, as with all of these cases, is how much people claim to know what happened, without having any evidence. What we do know is that recessions normally end everywhere because the monetary authority cuts interest rates a lot, and that gets things moving. And what we know in Japan was that eventually they cut their interest rates to zero and that wasn’t enough. And, so far, although we made the cuts faster than they did and cut them all the way to zero, it isn’t enough. We’ve hit that lower bound the same as they did. Now, everything after that is more or less speculation.

For example, were the problems with the Japanese banks the core problem? There are some stories about credit rationing, but they are not overwhelming. Certainly, when we look at the Japanese recovery, there was not a great surge of business investment. There was primarily a surge of exports. But was fixing the banks central to export growth?

In their case, the problems had a lot to do with demography. That made them a natural capital exporter, from older savers, and also made it harder for them to have enough demand. They also had one hell of a bubble in the 1980s and the wreckage left behind by that bubble – in their case a highly leveraged corporate sector – was and is a drag on the economy.

The size of the shock to our systems is going to be much bigger than what happened to Japan in the 1990s. They never had a freefall in their economy – a period when GDP declined by 3%, 4%. It is by no means clear that the underlying differences in the structure of the situation are significant. What we do know is that the zero bound is real. We know that there are situations in which ordinary monetary policy loses all traction. And we know that we’re in one now.

Shorter Krugman, “we’re in new territory in terms of the size of the problem, but it is all eerily similar to what happened to Japan”. Unfortunately our reaction has been eerily similar to what Japan did as well.

Krugman’s bottom line:

WH: So, one way to think about it is that self-reinforcing financial crises rooted in overstretched, overborrowed companies and governments in less developed countries – like those in Argentina and Indonesia, which were amazingly destructive in the 1990s and 2000s, but localised – are now playing out in the developed world?

PK: There are really two stories. One is the Japan-type story where you run out of room to cut interest rates. And the other is the Indonesia- and Argentina-type story where everything falls apart because of balance-sheet problems.

WH: So in a nutshell your story is …

PK: The “Nipponisation” of the world economy with a bunch of “Argentinafications” playing a role in the acute crisis. But even after those are over, we have the Nipponisation of the world economy. And that’s really something.

And of course, implicit in the “Nipponisation” of the world economy is the “Nipponisation” of the US economy – something we’ve been talking about for some time. Now, add “cap and trade” and “health care reform” into the mix.

What will we be wishing we were suffering when that all kicks in, should it pass? Nipponisation, of course. As bad as lost decade or two might be, it would be heaven compared to the economic carnage those big tax and spend programs will inflict on a very weak economy here in the US. And that, of course, will ensure the “Nipponisation” of the world economy.

~McQ

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.

~McQ

[HT: Wm Teach, RWN]

How many times do we have to tell you…

… that was then, this is now!

President Obama, to The New York Times, March 6, 2009, on how he’s not a socialist:

[I]t wasn’t on my watch that we passed a massive new entitlement… without a source of funding.

No sir. That wouldn’t be “entirely consistent with free-market principles.”

So I’m sure Pres. Obama will come up with something better than (a.) letting the Bush tax cuts expire and (b.) ending the Iraq War as a means of funding his massive new entitlement.  Because those things won’t even handle the existing structural deficit, much less a new program.

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.

~McQ

We Have A “Winner”

Yes, friends, now we can all comfortably refer to the bevy of taxes sure to come on alcohol, sugary soft drinks and, well use your imagination and I’m sure you can rustle up a few more dozen items that would be perfect in this group.

The group name? “Lifestyle taxes”. Yes, in the land of the free and the home of the brave, if you choose the “wrong” lifestyle, you will pay for it in taxation.

Of course, as we’ve mentioned any number of times as we’ve talked about these sorts of taxes, there are no more regressive taxes than these (except for the quintessential “poor man’s tax”, the state run lottery).

An interesting little tidbit in the article this info comes from:

Soft drink and alcohol lobbyists have snapped into action, though so far their campaigns have been quiet compared to the blaring, multimillion-dollar battles that typify major showdowns.

Their low-key approach is due partly to committee leaders’ warnings to refrain from public attacks or be accused of sabotaging health care overhaul.

Key phrase? “[S]abotaging health care overhaul”. If you don’t think government, or at least the people writing this legislation, don’t have every intention in the world of dictating your “lifestyle” choices in the name of the health care costs they’ll be “managing”, you need to get out more.

~McQ

Health Care – “The Public Plan”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

~McQ

“Health Care Reform” Update (Updated)

A few new developments, none of them good.

One – Obama has indicated his willingness to entertain legislation that would tax your private health care benefits. What that means is you’ll be taxed on the money your employer spends on your health care insurance. Of course the obvious immediate effect would be to raise revenue to pay for the public portion of his health care plan.

Two – Obama has decided that making insurance mandatory may not be such a bad idea. This is 180 degree change from candidate Obama who attempted to hide his statist tendencies by pretending that he wouldn’t require mandatory insurance for Americans.

Threein a letter to Democratic senators:

He told Democratic Sens. Edward Kennedy (Mass.) and Max Baucus (Mont.) that their legislation must include a government-run insurance option that would compete against the private sector. He also reaffirmed his support for a Massachusetts-style insurance exchange.

What do you suppose will happen if government-run insurance is an option for all? Depending on how it is structured (if, for instance, if it is a universal pool), we could see massive dumping of private insurance by businesses pointing their employees to the government option.

Four:

[I]mbuing a federal panel with the power to make Medicare payment recommendations that Congress must either accept or reject in their entirety.

Obama likens this proposal, based on the current Medicare Payment Advisory Commission, to the way military base closure decisions are made. To Republicans, however, the notion smacks of the kind of “rationing” dictated by government-run healthcare programs in Europe and Canada.

Ezra Klein explains the “federal panel’s” proposed role:

The health system changes too quickly for Congress to address through massive, infrequent, efforts at total reform. New technologies and new care structures create new problems. A health care reform package signed in 2009 might miss some real deficiencies, or real opportunities, that present themselves in 2012. A health reform process that recognizes that fact is a health reform process that is continual, rather than episodic.

But the reason health reform is so infrequent is that it’s structurally difficult. Small tweaks are too technically complex for Congress to easily conduct and so are dominated by lobbyists. Large reforms attract broad interest but are impeded by polarization and the threat of the filibuster. The MedPAC changes under discussion are, in other words, nothing less than a new process for health care cost reforms. They empower experts who won’t be intimidated by the intricacy of the issues and sidestep the filibuster’s ability to halt change in its tracks.

In other words health care decisions that will directly effect you will be in the hands of an unelected and unaccountable panel of bureaucrats just as all the critics of this sort have program have been claiming since the beginning of the debate.

The effect?

MedPAC, of course, is restricted to Medicare. But there’s little doubt that where Medicare leads, the health care industry follows. Private insurers frequently set their prices in relation to Medicare’s payment rates. Hospitals are sufficiently dependent on Medicare that a reform instituted by the entitlement program becomes a de facto change for the whole institution, and thus all patients. A process that empowers Medicare to aggressively and fluidly reform itself would end up dramatically changing the face of American health care in general.

Klein is exactly right, but most likely not for the reasons he thinks he is. The level of care, innovation and incentive will follow the decline in prices driven by MedPAC. What the nation needs is insurance reform, not “health care reform”. And while that is how the proponents of this try to spin the issue as just that, MedPAC’s existence and proposed expanded role argues persuasively against that spin.

Watch carefully – the Democrats are going to try to move this quickly and with little debate.

UPDATE: Apparently the letter from Obama I spoke about above also had another effect:

President Obama’s letter to Senate lawmakers yesterday saying a healthcare package must include a public option may have stalled progress on a bipartisan deal, Sen. Judd Gregg (R-N.H.) said Thursday.

Gregg said that the president’s letter, which said a public option should be included in the legislation, stalled “significant progress” in negotiations.

“We were making great progress up until yesterday, in my opinion,” Gregg said during an interview on CNBC. “There’s a working group under Sen. Baucus that involves senior Republican and Senate senior members who are involved in the healthcare debate, and we were, I thought, making some fairly significant progress.”

The most discouraging thing about this update is the fact that Republicans, who are claiming government is too big and we’re spending too much are knee deep in negotiating more government and more spending (i.e. selling out – again) having apparently swallowed the Democratic premise that this is necessary whole.

~McQ

Health Care Is Why We’re Broke?

The more I listen to Obama, the more of an ideologue I realize he is and how willing he is to use any opportunity to “justify” his agenda, even those that don’t fit. For instance:

In a sobering holiday interview with C-SPAN, President Obama boldly told Americans: “We are out of money.”

C-SPAN host Steve Scully broke from a meek Washington press corps with probing questions for the new president.

SCULLY: You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?

OBAMA: Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we’ve made on health care so far. This is a consequence of the crisis that we’ve seen and in fact our failure to make some good decisions on health care over the last several decades.

This is about as twisted a bit of reasoning as I’ve seen in a while. We’re “out of money” because of “health care decisions?”

What total nonsense. This is a politician using a crisis unrelated to “health care decisions” to push his ideology (i.e. that it is government that is the answer in all areas of life). As Glenn Reynolds says:

“I’ve bankrupted the nation, so now your only hope is to pass my healthcare plan.” That goes beyond chutzpah to the edge of pathological dishonesty. Except, I guess, that it’s not pathological if you get away with it. And so far, he has.

Very true – but at some point, as his favorite pastor likes to say, the chickens have got to come home to roost.

From the same interview:

SCULLY: States like California in desperate financial situation, will you be forced to bail out the states?

OBAMA: No. I think that what you’re seeing in states is that anytime you got a severe recession like this, as I said before, their demands on services are higher. So, they are sending more money out. At the same time, they’re bringing less tax revenue in. And that’s a painful adjustment, what we’re going end up seeing is lot of states making very difficult choices there..

Painful choices? But for the federal government – unprecedented spending spree. The cognitive dissonance there is mind boggling.

~McQ

Sin Taxes To Fund Health Care?

First they came after the smokers. But I didn’t say anything because I don’t smoke. And then they came after the soda drinkers, and I didn’t say anything because I rarely drink soda.

But then they came after beer, but I couldn’t do anything because the precedent had been set (with apologies to Pastor Martin Niemöller).

Yes, sinners, you are going to pay for health care. You and the evil rich. “Sin” taxes are seemingly the chosen method of this administration for paying the bill for the upcoming health care debacle.

Consumers in the United States may have to hand over nearly $2 more for a case of beer to help provide health insurance for all.

Details of the proposed beer tax are described in a Senate Finance Committee document that will be used to brief lawmakers Wednesday at a closed-door meeting.

Taxes on wine and hard liquor would also go up.

Apparently they’re still discussing sugary drinks as well (although it seems diet drinks are not yet on the table) because, you know, obesity is a problem and since government will be paying for all of this (can taxing Oreos be far off?).

But remember:

“If you make less than a quarter of a million dollars a year, you will not see a single dime of your taxes go up. If you make $200,000 a year or less, your taxes will go down.”

Unless, of course, you’re a smoker, a fattie or a boozer (or, heaven forbid, all three).

~McQ