The Obama White House push for an omnibus health care bill is really surprising in light of its likely political impact. Once enacted, there are few Americans that won't feel dramatic cost increases and substantial reductions in health care provision. Within the next twelve months, most American families' health care costs will rise more than thirty percent thanks to Obamacare and within twelve months, they will know it. What happens in twelve months? The 2010 Congressional elections -- that's what.
Republicans should vote for cloture and then vote against Obamacare. That way they can insure its passage. It is a free pass for the Republican Party for a generation. Virtually no American will feel better about their health care than before Obamacare. Those on Medicare will be especially aggrieved since over $ 50 billion per year of their current care is eliminated in all versions of Obamacare. The over 65 population is the single fastest growing demographic in the American population, which will become solidly Republican for years to come.
How about the young? The burden of cost is shifted to the young in this bill. The young have only slight need for health care insurance, but they will pay mightily under Obamacare. Their romantic illusions of life under Obama will be shattered by the realities of Obamacare.
There simply are no winners, except Republican politicians who will not likely be in any big hurry to roll Obamacare back. Better it stay in place as a reminder of what happens when government takes over a large sector of the economy. Too bad if you need health care.
At least with "card check," the unions are happy. No one will be happy with Obamacare. It may as well be retitled the "Republican Congressional Full Employment Act"
Thursday, October 29, 2009
Wednesday, October 28, 2009
Another Dumb Idea Courtesy of Barney Frank
Barney has decided that financial service firms should contribute to a fund that would then be available to "bail out" firms that go belly up. Great!
Imagine that, in your neighborhood, everyone was required to contribute to a fund in case any of your neighbors couldn't pay their bills. This shifts the responsibility away from the decision makers. Folks could easily run up big bills without difficulty. Why not? If I know there is a fund available in case Joe Smith can't pay, then I will lend Joe Smith unlimited amounts of money (so long as the fund is unlimited). And Joe? He will gladly borrow to the hilt, since the rates he pays reflect the fund that stands behind him, not his own profligacy.
So, what happens. Barney's bill will encourage financial service companies to take much greater risks than they have in the past and the market will provide these companies with the wherewithal to take these risks, since there is a fund hiding behind the scenes to absorb the losses. Of course, in reality, since so much risk will be taken, the taxpayer will ultimately bear the brunt of the losses in Barney's "too big to fail" world.
Better would be simply to let those who take the risk bear the brunt of the losses. Let the profligate go "poof" and leave the poor taxpayer alone. And, stop providing incentives for lenders to lend to those taking the most risk, which is exactly what Barney's fund would do.
Barney and Chris are in a race to see who has the dumbest ideas. I would say that Barney now has a slender lead. But, Chris is still in the running.
Imagine that, in your neighborhood, everyone was required to contribute to a fund in case any of your neighbors couldn't pay their bills. This shifts the responsibility away from the decision makers. Folks could easily run up big bills without difficulty. Why not? If I know there is a fund available in case Joe Smith can't pay, then I will lend Joe Smith unlimited amounts of money (so long as the fund is unlimited). And Joe? He will gladly borrow to the hilt, since the rates he pays reflect the fund that stands behind him, not his own profligacy.
So, what happens. Barney's bill will encourage financial service companies to take much greater risks than they have in the past and the market will provide these companies with the wherewithal to take these risks, since there is a fund hiding behind the scenes to absorb the losses. Of course, in reality, since so much risk will be taken, the taxpayer will ultimately bear the brunt of the losses in Barney's "too big to fail" world.
Better would be simply to let those who take the risk bear the brunt of the losses. Let the profligate go "poof" and leave the poor taxpayer alone. And, stop providing incentives for lenders to lend to those taking the most risk, which is exactly what Barney's fund would do.
Barney and Chris are in a race to see who has the dumbest ideas. I would say that Barney now has a slender lead. But, Chris is still in the running.
NY Times Leonhardt on Target
I don't often get the opportunity to praise an economics article in the NY Times, but this morning's NY Times has a sterling piece by David Leonhardt. He tackles the Obama proposal to give America's senior citizens $ 250 apiece to make up for the absence of a cost of living index increase in social security payments this coming year.
Obama's idea is strange on two counts: 1) The cost of living index increases were supposed to offset inflation. If there is no inflation (and there is none), why does Obama think seniors need the $ 250? Is he just being generous (profligate?) with our unborn grandchildren's money? 2) Senior citizens are the demographic least effected by the current economic recession. Why single them out for special treatment? Leonhardt makes these points effectively in his probing article.
The answer of course is that Obama is in trouble with seniors because his health care reform promises to make major cuts in the actual provision of health care for senior citizens currently on medicare. They know that and he knows that. So, this is Obama's effort to buy them off. Once again, "change you can believe in." There is a pattern here.
Obama's idea is strange on two counts: 1) The cost of living index increases were supposed to offset inflation. If there is no inflation (and there is none), why does Obama think seniors need the $ 250? Is he just being generous (profligate?) with our unborn grandchildren's money? 2) Senior citizens are the demographic least effected by the current economic recession. Why single them out for special treatment? Leonhardt makes these points effectively in his probing article.
The answer of course is that Obama is in trouble with seniors because his health care reform promises to make major cuts in the actual provision of health care for senior citizens currently on medicare. They know that and he knows that. So, this is Obama's effort to buy them off. Once again, "change you can believe in." There is a pattern here.
Tuesday, October 27, 2009
Dodd Takes Us Back in Time
Chris Dodd holds the record for the most ridiculous Congressional proposals in modern time. He is working hard to hang on to that record (Barbara Boxer is closing in fast).
Dodd's latest is a proposal to "freeze" credit card interest rates. There's a great idea. That was the way the world used to work -- "usury" laws. The idea is that some rates are just plain unfair. Heck, in the Islamic world, all rates are unfair. They ban interest on loans. Islamic banking manages to get around that in practice by redefining what is meant by a loan.
So, what is Dodd up to? His idea is that by capping interest rates, borrowers will be better off and those stingy old lenders will not be able to "rip off" the borrowers. But, what if the stingy old lenders behave rationally. What will they do?
They will quit offering loans to all but the best credit borrowers -- rich people. Middle income and lower income folks need not apply. They will lose access to credit or worse, be forced to deal with unsavory illegal lenders.
When you pass a "maximum price" law what you are doing is telling a willing buyer and a willing seller: "Sorry, government knows better." You prohibit the transaction. This doesn't mean the buyer gets a lower price. What it means is that the transaction does not place. (Hint: that's why minimum wage laws create unemployment...such laws prohibit a transaction between a willing buyer and a willing seller).
That is what will happen in Dodd's brave new world. If borrowers can't charge the interest rates they need to take the risk of lending to middle income Americans, then they won't lend to middle income Americans.
Thanks to Chris Dodd, the plight of American middle income families could become worse than it is already.
Dodd's latest is a proposal to "freeze" credit card interest rates. There's a great idea. That was the way the world used to work -- "usury" laws. The idea is that some rates are just plain unfair. Heck, in the Islamic world, all rates are unfair. They ban interest on loans. Islamic banking manages to get around that in practice by redefining what is meant by a loan.
So, what is Dodd up to? His idea is that by capping interest rates, borrowers will be better off and those stingy old lenders will not be able to "rip off" the borrowers. But, what if the stingy old lenders behave rationally. What will they do?
They will quit offering loans to all but the best credit borrowers -- rich people. Middle income and lower income folks need not apply. They will lose access to credit or worse, be forced to deal with unsavory illegal lenders.
When you pass a "maximum price" law what you are doing is telling a willing buyer and a willing seller: "Sorry, government knows better." You prohibit the transaction. This doesn't mean the buyer gets a lower price. What it means is that the transaction does not place. (Hint: that's why minimum wage laws create unemployment...such laws prohibit a transaction between a willing buyer and a willing seller).
That is what will happen in Dodd's brave new world. If borrowers can't charge the interest rates they need to take the risk of lending to middle income Americans, then they won't lend to middle income Americans.
Thanks to Chris Dodd, the plight of American middle income families could become worse than it is already.
Monday, October 26, 2009
Krugman Says Health Reform "Will Work"
Once again, Paul Krugman has ventured forth in the health care reform debate (in today's NYTimes). Krugman begins with the premise that medicare works. Wonder why he thinks that? He, like Michael Moore, thinks Medicare is great. He and Moore are not old enough for Medicare so they have no idea what it is like. Furthermore, they will never really be subject to Medicare as their wealth will buy them whatever health care they want (even if they have to fly to India to get it). Rich people won't be restricted to Medicare so they think it's great. It is great, if you don't have to use it.
The problem is that for those who are eligible for Medicare, it is a complete nightmare. To begin with, just getting enrolled can be quite a project. It took me ten months to get enrolled in medicare after I became age-eligible. Thank goodness I didn't need it. (It is really a great system if you don't use it). I am covered by a policy covering University of Virginia employees. So, like Krugman and Moore, I don't really need it either. But, I have great familiarity with medicare as both my mother and sister are enrolled in medicare. Let me assure you that medicare is a nightmare to use and many things are not covered by medicare (and medicare supplemental packages) that are routinely covered by ordinary health insurance that one can buy over the counter (before Obamacare outlaws such insurance policies).
Of the 50 million Americans without health insurance, eleven million are currently eligible for free medical care under medicaid. Guess why they don't enroll? They can't figure out how to enroll. It is an absurdly complicated system and it takes social security the better part of a year to even consider an application, assuming you have the persistence to go through the mind-boggling application process. (Wonder why Nancy Pelosi and Max Baucus don't worry about the fact that eleven million eligible citizens don't bother to sign up for medicaid...how does a new program with new, more complicated, signup procedures help this group?).
As is widely known medicare is not only a poor payer for medical services, it is enormously over budget and, combined with medicaid, will run out of money in a very few years. Then what? The great system that Krugman and Moore like, but will never use, will simply quit paying for much of anything once the money runs out.
What a brave new world! Everyone will have health insurance but no one will get medical care and the costs of this absence of provision will be astronomical. (This is similar to what has happened to our educational system -- astronomical costs (highest in the world) and very little education actually provided)
Maybe Krugman should spend some time with folks that are currently on medicare and medicaid and then he might learn that medicare is a complete mess and bankrupt to boot. Is this what he things the rest of the country needs? Is this what will work?
It is not an accident that the vast majority of folks now on medicare are protesting the Obamacare proposals. They know what a disaster this will be. They are already experiencing it.
The problem is that for those who are eligible for Medicare, it is a complete nightmare. To begin with, just getting enrolled can be quite a project. It took me ten months to get enrolled in medicare after I became age-eligible. Thank goodness I didn't need it. (It is really a great system if you don't use it). I am covered by a policy covering University of Virginia employees. So, like Krugman and Moore, I don't really need it either. But, I have great familiarity with medicare as both my mother and sister are enrolled in medicare. Let me assure you that medicare is a nightmare to use and many things are not covered by medicare (and medicare supplemental packages) that are routinely covered by ordinary health insurance that one can buy over the counter (before Obamacare outlaws such insurance policies).
Of the 50 million Americans without health insurance, eleven million are currently eligible for free medical care under medicaid. Guess why they don't enroll? They can't figure out how to enroll. It is an absurdly complicated system and it takes social security the better part of a year to even consider an application, assuming you have the persistence to go through the mind-boggling application process. (Wonder why Nancy Pelosi and Max Baucus don't worry about the fact that eleven million eligible citizens don't bother to sign up for medicaid...how does a new program with new, more complicated, signup procedures help this group?).
As is widely known medicare is not only a poor payer for medical services, it is enormously over budget and, combined with medicaid, will run out of money in a very few years. Then what? The great system that Krugman and Moore like, but will never use, will simply quit paying for much of anything once the money runs out.
What a brave new world! Everyone will have health insurance but no one will get medical care and the costs of this absence of provision will be astronomical. (This is similar to what has happened to our educational system -- astronomical costs (highest in the world) and very little education actually provided)
Maybe Krugman should spend some time with folks that are currently on medicare and medicaid and then he might learn that medicare is a complete mess and bankrupt to boot. Is this what he things the rest of the country needs? Is this what will work?
It is not an accident that the vast majority of folks now on medicare are protesting the Obamacare proposals. They know what a disaster this will be. They are already experiencing it.
Saturday, October 24, 2009
Crunch Time
Attempting to meld together the impossible, Senator Harry Reid and House Speaker Nancy Pelosi are trying to bring a "compromise" "health care reform" package before the Congress. Given the enormous differences between House and Senate, this is no small task.
The bottom line is cost. The Democrats don't mind eliminating choice from health care. After all, that's pretty much what medicare and medicaid are all about. That doesn't bother them. They don't mind blowing away the free market either. After all, that is what the GM and Chrysler (and other) bailouts, the Pay Czarr, etc., are all about. The problem for the Democrats is simply one of cost. The US fiscal situation is completely out of control and the passage of the Obama health care plan (any version) simply nails the coffin shut. It is hard to see how the US avoids bankruptcy as a nation, if this bill passes and is signed into law.
That is the heart of the Democrats problem. Why does cost matter when it never mattered before? Because this time, something will have to be done if the country is to survive. There is no alternative but ridiculously high taxes (and even that won't work), absurdly high inflation (which will only work for a little while), and massive cuts in actual health care provision. Everyone will eventually be insured, they just won't get any medical care.
More and more Americans and more and more Democrats can see clearly where this is headed.
Senator Reid and Speaker Pelosi are in a pickle, but the real loser (besides the American public) is Obama. Obama is in big trouble if this passes. His presidency will never recover because the public will feel the damage that this "reform" produces very quickly. Certainly in time for the next election.
The bottom line is cost. The Democrats don't mind eliminating choice from health care. After all, that's pretty much what medicare and medicaid are all about. That doesn't bother them. They don't mind blowing away the free market either. After all, that is what the GM and Chrysler (and other) bailouts, the Pay Czarr, etc., are all about. The problem for the Democrats is simply one of cost. The US fiscal situation is completely out of control and the passage of the Obama health care plan (any version) simply nails the coffin shut. It is hard to see how the US avoids bankruptcy as a nation, if this bill passes and is signed into law.
That is the heart of the Democrats problem. Why does cost matter when it never mattered before? Because this time, something will have to be done if the country is to survive. There is no alternative but ridiculously high taxes (and even that won't work), absurdly high inflation (which will only work for a little while), and massive cuts in actual health care provision. Everyone will eventually be insured, they just won't get any medical care.
More and more Americans and more and more Democrats can see clearly where this is headed.
Senator Reid and Speaker Pelosi are in a pickle, but the real loser (besides the American public) is Obama. Obama is in big trouble if this passes. His presidency will never recover because the public will feel the damage that this "reform" produces very quickly. Certainly in time for the next election.
Wednesday, October 21, 2009
Volcker Stands Alone
Paul Volcker is a great American. Appointed by Jimmy Carter to be the Federal Reserve Chairman in 1979, he served two four year terms ending in 1987 (succeeded by Alan Greenspan). Volcker broke the back of the great inflation of the 1970s (which peaked at 14 percent in August of 1979) and ushered in (helped by Reagan's tax cuts) the greatest wealth increase in a single country in human history. Today's Dow Jones average of 10,000 seems a long, long way from the August 1981 reading of 780. The 1980s and 1990s were great years for the United States and Paul Volcker is one of the folks to thank for those great years.
These days Volcker is an economic adviser to Barrack Obama, who listens to no one, apparently. Obama certainly does not listen to Volcker. Volcker is calling for the breakup of the very largest commercial banks and a return to Glass-Stegall (which would divorce commercial banking from investment banking). Volcker does not like the "too big to fail" concept and would prefer to eliminate "bigness" rather than over-regulate the financial sector. Obama prefers massive new regulation, which will simply shift financial leadership to Asia and relegate the US to the financial backwaters of the modern world. Volcker sees the problem.
While not in agreement with Volcker's recommendations, I have to admit my admiration for this great man and his ability to point to the real issues. No one else in the Obama White House seems to believe in anything but bigger government, higher taxes, and an endorsement of a permanently stagnant US economy. Three cheers for Paul Volcker.
These days Volcker is an economic adviser to Barrack Obama, who listens to no one, apparently. Obama certainly does not listen to Volcker. Volcker is calling for the breakup of the very largest commercial banks and a return to Glass-Stegall (which would divorce commercial banking from investment banking). Volcker does not like the "too big to fail" concept and would prefer to eliminate "bigness" rather than over-regulate the financial sector. Obama prefers massive new regulation, which will simply shift financial leadership to Asia and relegate the US to the financial backwaters of the modern world. Volcker sees the problem.
While not in agreement with Volcker's recommendations, I have to admit my admiration for this great man and his ability to point to the real issues. No one else in the Obama White House seems to believe in anything but bigger government, higher taxes, and an endorsement of a permanently stagnant US economy. Three cheers for Paul Volcker.
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