We Can’t Afford an $856 Billion Health Reform

I debated with myself whether I should even post this blog, because the statement I made in the title seems so obvious.  Yet that’s what Sen. Max Baucus has proposed, and it’s under serious consideration.

President Obama has forecast annual budget deficits in excess of a trillion dollars as far out as forcasts are being made.  Regardless of whether Sen. Baucus’s plan would be beneficial, we just can’t afford it.

The $856 billion cost is the projected cost over ten years, so would amount to about $85 billion a year, if the projection is accurate.  “Cash for Clunkers” was a relatively simple program legislated to cost $1 billion, and ended up costing $3 billion.  Everything the government does costs more than they project, so I’m not confident (to say the least) that if passed the cost could actually be contained to this amount.  Even if it did, we still can’t afford it.

Sen. Baucus’s plan would be financed by $349 billion  in new taxes and fees, with the rest coming from Medicare and Medicaid savings.  Taking those numbers, that’s another $35 billion in new taxes per year, on top of the tax increases the Obama administration has already factored into its budget.  With about 300 million Americans, that comes out to $115 a year per person, or $460 a year for a family of four.  That’s not an insignificant tax increase.

As for the savings in Medicare and Medicaid, I’m skeptical that any saving will actually materialize, but if it does, it will have to come from eliminating some of the care those recipients are now receiving.  That’s just the rationing that has scared people, and scared seniors in particular.  More likely, the savings won’t materialize and the excess will just be added to our already unsustainable deficit.

This plan is just wishful thinking, and I’m not even considering whether it would help the delivery of health care.  I’m saying it’s wishful thinking purely on the fiscal side.  We can’t pay for it, and the result will have to be some combination of rationing health care, reducing federal expenditures in other areas, and tax increases beyond those proposed by Sen. Baucus.

The results look bad without even considering how his plan proposes to alter the delivery and financing of health care.  And just looking at the fiscal side of things, the plan will reduce the actual delivery of health care, not because that’s what Sen. Baucus proposes but because when it comes to financing his plan it’s too expensive to implement otherwise.  This plan means higher taxes and a reduction in the delivery of health care to patients.

That is my assessment of the cost.  Now, consider the benefits of this plan.  An overwhelming majority of Americans are satisfied with the health care they currently receive.  A persistent 15 percent or so of the population remains uninsured, but the uninsured tend to be younger and healthier than the average American, and they tend to remain uninsured for short durations.  Most of the uninsured this year will be insured next year, and even the uninsured get critical care at emergency rooms if they need it.

Sen. Baucus is proposing a health reform measure we can’t afford to replace a system that satisfies most people.  Wouldn’t most voters, when confronted with these facts, be opposed to the reform?

Most of the reform Sen. Baucus proposes would not take effect until 2013, after the next presidential election.  If the reform is such a good idea, why wait?  I’ve already answered that question.  The reform isn’t a good idea, and once people realize that it will impose substantial costs on almost everybody while reducing their access to health care, they will mobilize against it.  But by then it will be too late.

Race and Development

The always-excellent William Easterly has a great post entitled “How the British Invented ‘Development’ to Keep the Empire and Substitute for Racism.” After doing a lot of reading on the development of ideological justifications for slavery in the US and after searching through the papers of the Association of Southern Women for the Prevention of Lynching, I think classical liberals and libertarians don’t pay enough attention to what our friends on the left have to say about race, racism, and how these affect institutions. In my Mises U lecture on “Common Objections to Capitalism,” I pointed out that history is smeared with racism, bigotry, and the unfortunate effects of tribalism. If you take two racist societies that are alike in every respect and give one society capitalist institutions while giving the other society statist institutions, I would expect the capitalist society to be less racist as time goes on.

What does this have to do with Easterly? Easterly discusses the late twentieth century fetish for “development” and argues that it has its roots in the racist assumptions of European imperialism (am I starting to sound like a Marxist?!). I would argue that its appeal is that it flatters the paternalist conceit of the man of system. I think this was particularly true in the technocratic intellectual environment of the 1940s and 1950s. Here is his punchline, lest Easterly be misunderstood:

Why does this history matter today? After all, the Empire fell apart much sooner than expected, and racism did diminish a lot over time. And I do NOT mean to imply guilt by association for development as imperialist and racist; there are many theories of development and many who work on development (including many from developing countries themselves) that have nothing to do with imperialism and racism.

But I think the origin of development as cover for imperialism and racism did have toxic legacies for some. First, it meant that the concept of development was determined to fit a propaganda imperative; it was NOT a breakthrough in thought by economists. Second, it followed that development from the beginning would stress the central role of Western aid to help the helpless natives (which shows up in the early development theories like the “poverty trap” and the “Big Push,” and the lack of interest in local entrepreneurs and market incentives). Third, the paternalism was so extreme at the beginning that it would last for a long time – I still think it is widespread today, especially after today’s comeback of the early development ideas in some parts of the aid system. And this history also seems strangely relevant with today’s “humanitarian” nouveau-imperialism to invade and fix “failed states” like Iraq and Afghanistan.

Membership in the development elites is far more diverse than in Lord Hailey’s time, but I fear that, to use Wolton’s words, “in the end, the elites still believe in their fundamental superiority.”

Cross-posted at Division of Labour.

Ah, More “Change”

Obama supports extending provisions of the Patriot Act that are about to expire. I know. Big surprise. He is also planning to bring back Combatant Status Review Tribunals, which were ruled unconstitutional by the Supreme Court as they were used at Guantanamo, and instate them at Bagram. He’s also invading other countries, in this case Somalia, without consulting the American people or Congress.

What’s the Point of Demonstrating?

Thousands of Americans have just staged a demonstration in Washington, D.C., to express their displeasure with the growth of government in general and the Obama administration’s health-insurance proposals in particular. Such demonstrations are a tradition in this country. The First Amendment, which people usually associate with freedom of speech, religion, and the press, also stipulates that Congress shall make no law abridging “the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.” The Founders knew that people would sometimes desire to complain publicly against government policies that affected them adversely. After all, their own revolution had begun amid many such protests against the British government.

So, in this country, people have a constitutionally guaranteed right to demonstrate and petition for redress of grievances, and they often exercise this right. Although the government sometimes tries to control when and how people demonstrate, especially when such protests might prove too visibly embarrassing to the emperor or to one of the two gangs that purport to be competing political parties in what is actually a one-party state, most of the time the rulers seem to appreciate that such demonstrations pose no genuine threat to their control of the state and that the wise course is to allow the peasants to blow off steam. Later, they can be told how fortunate they are to live in a country where the government permits freedom of speech, as if such speech in itself would feed the baby.

I have considerable experience as a demonstrator. In the late 1960s and early 1970s, I marched and otherwise participated in many protests against the U.S. war in Vietnam. Although I managed to get through all these experiences without getting my head scarred by a police night stick—an achievement of which many of my fellow demonstrators cannot boast—I did learn a fair number of lessons in what we might call “applied political science.”

Lesson number one is that the cops do not believe in your First Amendment rights, or any other rights of yours, for that matter. If they find it convenient for their own purposes, which often seem to include nothing more than throwing their weight around, they will yell at you, shove you, threaten you with night sticks, dogs, and horses, whack you with their clubs, and lob tear gas into your ranks. It’s all in a day’s work for those who have sworn “to serve and protect.” Best you remember, however, that the phrase is short for “serve and protect the state,” not for “serve you and protect your rights to life, liberty, and property.” Protecting your right to demonstrate peacefully against state policies is not part of the cops’ job description.

Lesson number two is that the people in the demonstrations are there for all sorts of reasons, despite what one might suppose from their announced issue(s) as signified by signs, banners, and group statements. I often bemoaned the lack of seriousness in many of the antiwar demonstrators with whom I marched. A great many of the younger ones seemed to be there mainly because demonstrating against the war was, literally, a sexy thing for a college student to do: at the demonstration, one might meet someone suitable for a not-very-subsequent sexual liaison—in plain language, participating in a demonstration served as a reasonably promising avenue to getting laid. Beyond this quite understandable motivation, however, people had all sorts of other reasons for participating. Some fancied themselves radicals out to overthrow the government. Others were worried that children, grandchildren, or other relatives and friends might be drafted, shipped to Vietnam, and killed. Some of us actually cared about the countless hundreds of thousands of Asians being slaughtered by U.S. forces for no good reason. Although we were all against the war in some way, our ways varied widely. The participants in most demonstrations, including the recent one in Washington, no doubt have this same heterogeneous quality. In a protest, however, the enemy of my enemy is my friend.

Lesson number three is that the mainstream media are in league with the government when they report on demonstrations. For example, they will minimize any violence the police use against the demonstrators and exaggerate any violence the demonstrators perpetrate. I recall one protest in particular, where our group included tens of thousands of marchers passing through the streets of downtown Seattle. The police, as usual, were out in force, lining the streets and salivating for a chance to crack some heads. Present also were the undercover agents with their cameras; for some reason, the authorities always wanted lots of photos of us dangerous protesters—college students, hippies, grandmothers, little kids in their mother’s arms, and so forth, all obviously dangerous subversives. At this particular protest, the organizers took great pains to instruct everybody about scrupulously avoiding any kind of violence, because we all knew that the media would use it to discredit everything about the event. So we maintained absolute order, or so I thought as I made my way through the streets somewhere in the middle of the long parade. No violence whatsoever did I see. Hooray! The next morning, however, the banner headline in the Seattle Times read, “Violence Mars Antiwar Demonstration.” Someone, it seems, had broken ranks and smashed a shop window, an occurrence so inconsequential that even I, positioned right in the middle of the affair, had not noticed it. This incident illustrates well what passes for journalistic impartiality and balance in this country. Rest assured that if you are bucking the system, the system’s guardians in the news media will smack you down by stigmatizing you as some sort of dangerous hooligan or totally out-of-touch wing-nut. They’ll also minimize your group’s numbers, again seeking to marginalize and trivialize your efforts.

Lesson number four is that the powers that be don’t give a damn about your demonstrations or the reasons that have impelled you to participate in them, except to the extent that your actions create bad press for them and their policies. The minute they conclude that your demonstrations actually imperil their personal grip on power, they will cease to be so accommodating of your First Amendment rights. They might even cook up something called COINTELPRO, whereby they employ every political dirty trick in the book against you, up to and including murder. (If you suppose I’m exaggerating, I suggest you do some research on COINTELPRO and other such government schemes to violate the people’s civil rights systematically.) Nowadays, the USA PATRIOT Act lends itself splendidly to broad-gauge surveillance and disruption of peaceniks and other troublemakers.

 After the Vietnam War ended, I stopped participating in public demonstrations, not because I thought the government no longer deserved protest and petition for redress of grievances, but because I lost all faith in the efficacy of the demonstrations. I was gaining a sounder appreciation of how the state operates, and as my understanding deepened, I found myself unable to suppose that the people who constitute the state have any interest in doing what might loosely be called “the right thing.” As for those of us outside the precincts of the state and its supporting coalition of special-interest groups, the state wants us to buckle under to its dictates, shell out the taxes, fees, and fines it demands from us, and shut up. As long as we faithfully comply with the first two requirements, it is willing to cut us some slack on the third, but only up  to the point at which our expressions of grievance might actually weaken its iron grip on power. So, when I see demonstrations like the one that just took  place in Washington, I sympathize with the people who’ve gone to the trouble of protesting against the government’s abuses, but I find myself wondering, Do these poor souls really think they’ll accomplish something by this protest?

The Keynesians Were Wrong Way Before the 1970s

In an editorial published in the Wall Street Journal on 9/11, former Reagan and George H. W. Bush public official Peter Ferrara writes that “the fallacies of Keynesian economics were exposed decades ago by Friedrich Hayek and Milton Friedman. Keynesian thinking was then discredited in practice in the 1970s, when the Keynesians could neither explain nor cure the double-digit inflation, interest rates, and unemployment that resulted from their policies.”

Mr. Ferrara should get out more and read more, especially so the scholarly work of the Independent Institute’s own Robert Higgs, who argues convincingly that the intellectual poverty of Lord Keynes’s ideas was evident at the end of the Second World War, when massive cuts in federal government spending, which on the basis of Keynesian orthodoxy should have caused a return to pre-war recession or depression, actually launched a period of robust economic growth as scarce resources were reallocated from the production of military goods to that of civilian goods.

The lesson of Higgs’s analysis is that government cannot promote prosperity by massive deficit spending, but only by getting out of the way of entrepreneurial spirit of the private sector.

Anti-Big-Government DC Demonstration Draws Huge Crowd: “Don’t Tread on Me”

According to ABC News, Washington D.C. police initially estimated that a crowd of 60-70,000 people traveled from across the U.S. to participate in a massive demonstration (in the rain) not just against ObamaCare but the overall, huge explosion of federal power, spending and debt. Updated estimates (see London Daily Mail and San Francisco Examiner) place the crowd at as large as 2 million. As reported by the New York Times:

Ruth Lobbs, 57, a schoolteacher from Jacksonville, Fla., said she flew to Washington on Saturday to protest how she believes the government has violated the Constitution. She said she did not vote for the president, adding that her anger has been building for years.

“It’s more than Obama—this isn’t a Republican or a Democratic issue,” Ms. Lobbs said as she held a yellow flag that declared “Don’t Tread on Me.”

“I don’t know if anything will come of this or not,” she said, “but this is a peaceful way of showing our frustration.”

An article at Bloomberg further states that:

Thousands of protesters carrying signs saying “Obama = Socialism” and “Keep Government out of Health Care,” descended on Washington today to oppose government spending and the rising budget deficit.

“This tax-and-spend government wants to limit our freedom and erode peoples’ rights,” said Leonard Starr, 65, from Richmond, Virginia. “We’re building a giant bureaucracy headed to fascism using untruthfulness and lies.”

And an article in the Washington Post notes that:

Jeff Mapps, 29, a stagehand and labor union member from South Philadelphia, left home about 6 a.m. to come to the protest. He said he hadn’t been involved in previous Tea Party demonstrations, but he watches Fox News host Glenn Beck “all the time” and he wanted to be a part of something he thinks will be historic. Beck has been drumming up support for the march.

Holding a sign that said “Preserve, Protect, Defend” on a Red Line Metro train packed with conservative activists, Mapps fretted over a “blatant disregard for the Constitution.”

“We’ve been watching it for six to eight months,” he said. “It was finally an opportunity to get involved. It’s been boiling over . . . It’s not just about health care. It’s about so much more than that.”

. . . .

Like countless others at the rally, Joan Wright, 78, of Ocean Pines, Md., sounded angry. “I’m not taking this crap anymore,” said Wright, who came by bus to Washington with 150 like-minded residents of Maryland’s Eastern Shore. “I don’t like the health-care [plan]. I don’t like the czars. And I don’t like the elitists telling us what we should do or eat.”

This demonstration may reflect one of the fastest growing, grassroots movements in American history and one that is rapidly inspiring millions of people of the need to seek major reductions in the size and scope of government power. Simultaneously, the poll ratings for Obama and Congress, and state governments continue to drop.

Recommended books by Senior Fellow Robert Higgs on the need to significantly reduce government power include the following:

Against Leviathan: Government Power and a Free Society, by Robert Higgs

Crisis and Leviathan: Critical Episodes in the Growth of American Government, by Robert Higgs

Neither Liberty Nor Safety: Fear, Ideology, and the Growth of Government, by Robert Higgs

Depression, War, and Cold War: Challenging the Myths of Conflict and Prosperity, by Robert Higgs

Why is the Senate in the Tourism Business?

The Senate yesterday voted to charge international travelers a $10 fee to help pay for a new nonprofit corporation that would promote tourism in the United States. See here.

A reasonable person could be forgiven for wondering why the Senate is even bothering with such minutiae, as well as questioning the economic wisdom of such legislation, fraught as it is with unintended consequences to other sectors of the economy, possible retaliatory fees for U.S. travelers, etc. But, once again, scratch the surface and there’s a perfectly rational (political) explanation:

In backing the legislation, Democrats were also looking to give Senate Majority Leader Harry Reid a boost as he seeks a fifth term representing the state of Nevada.

The Public Option: The President’s Analogy

In President Obama’s address on health care reform to Congress last night (September 9) he argued for a public option to private health insurance as an alternative, to compete with private insurers and give them an incentive to be responsive to their customers.

Some critics have argued that with the advantages of government backing and the taxes the president is advocating on private suppliers, the public option would crowd out private insurers and most people would end up on the government’s plan.  President Obama responded to this criticism by noting that despite the existence of public universities in every state private universities remain an option.  Interesting analogy!

Looking at higher education enrollment, 75% of students are in public colleges and universities and 25% are in private.  The census bureau reports that about half of 18-22 year olds are enrolled in higher education, so if we include those outside the system, the private sector covers only about 12.5% of that age group.

I don’t want to push the president’s analogy too far, but at the same time there is a similarity between education and health care plans here.  The cost advantages of the public option (that’s why the president wants it) will entice people to sign up, leaving those upper-income people who are willing to pay more getting the upper-tier service given by private suppliers.

If the public option were implemented, how much of the market would it take up, and how much would be left to private insurers?  If the president’s education analogy holds up all the way, most people would be on the government plan and private insurance would cover 12.5-25% of the market.  It’s the president’s analogy I’m working off here, not some idea of my own.

Is this realistic?  Both Canada (since 2005) and Britain have national health care with a private option, and in both cases almost everyone is on the government plan because of the lower cost — which, again, is why the president supports it.

How good will your care be with the public option?  We’ve heard stories about the long waits and denied procedures in both Britain and Canada.  Here’s another one.  A few years ago a friend of mine was in Europe when he developed an eye problem that required surgery.  He checked into a British hospital and had the surgery right away, paid for by his American insurance.  His eye surgeon told him that had he been on Britain’s national health care, he would have had to wait 18 months for the surgery.  My friend — and any Brits who were insured or willing to pay outside Britain’s government plan — were housed on a separate floor of the hospital and got their treatment immediately.

Is this how the United States would be under the public option?  I don’t know, but most Americans are happy with the health care they receive now, so they are justified in being concerned about impending changes.

If the president’s analogy really holds, and the public option is really put into place, you will be able to keep your current coverage (except that it will be modified by additional regulations).  However, most people will be on the government plan and only the most well-to-do 12-25% of the population will remain with private insurance.

I don’t know if that’s what the president meant, but that’s what he said.  And if you reflect on it a minute, it’s not unreasonable to think that public health insurance will do to private health insurance what public education has done to private education.

Why Does Health Insurance Cost So Much?

In direct contrast to Barack Obama’s nationally televised talk on his government-mandated health care plan, here is John Stossel’s recent, very incisive, special segment on ABC-TV’s 20/20, “Health Care Mystery: What’ll That Cost?”, in which he examines government-created third-party payers and asks why it is so hard to find out what health care actually costs:

ObamaCare Speech: I’m Radical and Mad as Hell

Dateline: September 9, 2009:
Obama speech (as I watch): From the lips of POTUS  . . .

Introduction:
Insurance companies are evil but I do not want to put them out of business. (Huh? After listening to the litany of insurance company evildoing, any sane person would put them out of business.)

Middle section:
I favor a not-for-profit public option that will cost nothing (cough, cough). It will promote competition—but competition across state lines is still illegal. (Socialism and states’ rights, together at last!)

If you eliminate profit and executive salaries, the government plan will be cheaper than private plans. (That is the essential belief of socialism: eliminate profit [a net rate of 4% on average] and you can make the world over. . .)

But, wait, even though private plans are awful, greedy, and the socialist plan is better, we estimate only 5% of Americans will choose the public plan. (Are we morons?)

Are you confused yet?

The Uninsured:
As for the uninsured: We will require “irresponsible” young people and greedy employers who don’t insure workers to get or offer coverage. (What’s next? Debtor’s prison for those young people who don’t buy insurance? Not going to happen. See Massachusetts). However, we will start by exempting the following:

*Small business: 95% of firms (who employ 50% of the population) will be exempt.
*Hardship cases will be exempt.
*Illegal immigrants will not be covered.
*Young people will not sign up (trust me, I used to sell health care).

Well, that amounts to about 90% of the uninsured.

Conclusion:
As the speech goes on, the president gets angry:

“Experts” will determine where the “waste” is located. And you people with good health care plans (remember, from the greedy insurance companies!) will be taxed so you can pay for a plan that “doesn’t cost anything.”

Those who say health care costs will rise are “liars.” The finger is wagging at his opponents.

Let us apply this profit=waste, government=efficiency model to every industry! We have taken over the car industry, we know best how to manage health care because “we are from the government and we are here to help.”

Remember citizens:
Sign up and “do your part” for the Volk. If you don’t, face the consequences.

POSTSCRIPT: Many viewers may have missed a crucial line: The president said his Plan would not go into effect for FOUR years so that “we get it right.” That sent chills down my spine because it means “regime uncertainty” — the term devised by Independent Institute scholar Robert Higgs to describe how economies slump when business is uncertain about the direction of the government. In this case, the government promises to do drastic things to the economy but investors and employers will just have to wait. Is Obama trying to make this a Great Depression?

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