Archive for the ‘Entitlements’ Category

Obamanycare Confirmed

January 26, 2012 Leave a comment

One of the best lines used against Romney was “Obamanycare,” It captures the essence of what is wrong with Mitt. He is a liberal at heart, believes in Paternalism and is an empty suit.

Now we have confirmation that Romneycare was instrumental in the formulation for Obamacare.

Taken together, Massachusetts’s experience under the 2006 reform initiative, which became the template for the structure of the Affordable Care Act, highlights the potential gains and the challenges the nation now faces under federal health reform.

The rest of the study is interesting though. They basically confirm that people are using more health care, which is expected. When it comes to affordability they say this:

 Consistent with that expectation, there have been gains in the affordability of care for adults since 2006, as evident in a lower burden from out-of-pocket health care spending (excluding premiums) and less unmet need for care because of cost (Exhibit 4; additional measures in Appendix Exhibit 4; simple [unadjusted] estimates in Appendix Exhibit 8).9

Why are they excluding premiums? Maybe because premiums have risen more rapidly in Masachusetts than anywhere else in the country?

 As highlighted in Figure 1, in the absence of policy change, health care spending in Massachusetts is projected to nearly double to $123 billion in 2020, increasing 8 percent faster than the state’s gross domestic product (GDP).

Take out most expensive portion and of course it’s “affordable.” Hell if you don’t count all the beer I drink, I never drink alcohol either! Only Academics and Politicians think that is good policy (see how they measure CPI).

January 19, 2012 
On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers was unchanged in December, as it was in November. The index for all items less food and energy rose 0.1 percent in December after increasing 0.2 percent in November.

All in all, Romneycare is a disaster. The economics are wrong. I’m not even going to get into the Mandate, which was also used for Obamacare. Obamanycare is a great word to use to describe MassCare. It needs to be hung around Romney’s neck. Thankfully Newt is doing just that.


h/t: James Pethokoukis <—Read his story. It’s much better written than mine.

Was Eisenhower the last President to understand Opportunity Cost

From a Quote taken from post by  Bob Higgs:

The worst to be feared and the best to be expected can be simply stated.

The worst is atomic war.

The best would be this: a life of perpetual fear and tension; a burden of arms draining the wealth and the labor of all peoples; a wasting of strength that defies the American system or the Soviet system or any system to achieve true abundance and happiness for the peoples of this earth.

Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.

This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals.

It is some 50 miles of concrete highway. We pay for a single fighter with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.

This, I repeat, is the best way of life to be found on the road the world has been taking.

This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.

This is true of all Government spending whether it is under the guise of defense or “Social Justice.” The money has to come from somewhere, and that somewhere probably had a drastically different use for it.

US Treasury Financial Report

April 15, 2010 3 comments

This is scary, just in time for Tax Day.

The Treasury Department recently issued the 2009 financial report of the United States government. Whereas there is lots of talk in Congress and in the press about the federal budget, the annual report was released to near silence. That’s too bad, not only because the annual report is untainted by creative accounting but also because its message is too important to ignore.

Read the whole thing, then check out the Federal balance sheet, here.

United States Government
Balance Sheets
as of September 30, 2009, and September 30, 2008 (in billions)

2009         2010

Total assets………………………………………………………………………. 2,667.9      1,974.7

Total liabilities …………………………………………………………………. 14,123.8     12,178.2

Yeah it’s that scary. And remember that’s not even counting the unfunded entitlement liabilities, Medicare, and Social Security.

Add in Social Security, this is just for 2009:

Present value of future expenditures in excess of future revenue …………………………………………………………………. -7,677 billion

Gives us 21,800 billion in the hole for 2009 (Not counting Medicare).

Tea anyone?

Cruising down the Road to Serfdom

March 22, 2010 4 comments

[Today]… socialism has come to mean chiefly the extensive redistribution of incomes through taxation and the institutions of the welfare state. In [this] kind of socialism the [totalitarian] effects I discuss in this book are brought about more slowly, indirectly, and imperfectly. I believe that the ultimate outcome tends to be very much the same…

Friedrich A. von Hayek – Road to Serfdom, 1976 edition

I don’t think March 21st 2010, will be they day remembered for the death of liberty in the United States. I know a lot of people are lamenting the passage of the Senate version of HCR in the House. There are still a few more procedural hurdles to go. I think it will ultimately end up on Obama’s desk, with huge pomp and fanfare by Liberals. Maybe Obama could auction off the numerous pen’s he will use to help pay off the debt?

Then there will be lawsuits from Attorneys General in at least Virginia, Florida and South Carolina, challenging the Constitutionality of Obamacare and the Mandate. The Mandate is unprecedented and the true affront to liberty. I don’t think the Court will do anything to stop the Mandate. Ever since the New Deal, the Court has sided with ever increasing Government power over personal liberty. If you have any doubts, Kelo vs. New Haven should have dashed that.

In the end, the only hope for the Republic is the people. The people have amassed in opposition to the ever increasing powers of Government in the Tea Parties. It’s no wonder that Progressives in the Media have tried to deride and discredit the Tea Party. They need to disparage the movement before as soon as possible. It hasn’t worked. The protests outside Washington will only get bigger than they were yesterday. They will only get louder. No amount of astro-turfing by the Liberals (Coffee party) or plants (the racial slurs supposedly reported being used against John Lewis) will detract from the growing Tea Party movement.

In the end, I think Obamacare will have done a huge service to the country. Not by its intended consequences but through its unintended consequences. Unintentionally, Obama, Reid and Pelosi have woken up the populace to how the sausage is made in Washington. The people don’t like what they see. They see bribery, thuggery and shady deals going down in order to barely pass a bill along purely partisan lines. I expect we will see huge protests this April.This is good for our country. The more the populace gets involved with the sausage making, the better.

This November, I hope enough of the populace goes out and votes out everyone of those yea votes, that we can do something truly unprecedented in our Nation’s history, repeal an entitlement and put make a u-turn on the Road to Serfdom. It remains to be seen, but Obama will definitely go down in history. Either as one of the greatest instigators of the Socialist State or as the cause of a Great Awakening. I’m hoping for the latter.

A Must Read: Steyn on Obamacare

March 6, 2010 2 comments

This article, by Mark Steyn, is a must read. Very Hayekian in the Road to Serfdom sense.

Obamacare worth the price to Democrats

Why is he doing this? Why let “health” “care” “reform” stagger on like the rotting husk in a low-grade creature feature who refuses to stay dead no matter how many stakes you pound through his chest?

Because it’s worth it. Big time. I’ve been saying in this space for two years that the governmentalization of health care is the fastest way to a permanent left-of-center political culture. It redefines the relationship between the citizen and the state in fundamental ways that make limited government all but impossible. In most of the rest of the Western world, there are still nominally “conservative” parties, and they even win elections occasionally, but not to any great effect (Let’s not forget that Jacques Chirac was, in French terms, a “conservative”).

The result is a kind of two-party one-party state: Right-of-center parties will once in a while be in office, but never in power, merely presiding over vast left-wing bureaucracies that cruise on regardless.

I’ve been thinking as much lately as well. I have to admit I was more thinking of the short term consequences for Obama. If Obamacare passes, he gets re-elected, because in two years all the Democrats that are against Obamacare will realize how it puts Health Insurance Companies in a Death Spiral. The Democrats will again confuse Government Failure with Market Failure. They will say that, even with the “generous” and “benevolent” actions taken by Government, the Health Insurance Market can’t cope with the problem, the only solution is More Government, and there you have it…Single Payer.

The Short Run, I was thinking about, leads to the Long Run, Steyn talks about.

Medicare drives up cost

March 1, 2010 11 comments

You don’t believe me? Would you believe the guy that help set up the medicare doctors pay tables then?

From NPR;

DAVID KESTENBAUM: Califano was President Lyndon Johnson’s adviser for domestic affairs. And the government was about to get into the health insurance business in a huge way – about to launch the largest health insurance plan we’ve ever had: Medicare. But the idea made doctors nervous, so LBJ, Califano and lawmakers made what seemed like a small concession. The government told doctors: We will pay you for every procedure you do. How much will we pay you? Whatever you think is right.

KESTENBAUM: Why were you worried they wouldn’t participate? You were going to pay them whatever they wanted.

Mr. CALIFANO: They were so opposed to it. I mean, they reluctantly – believe me, within two years, they love it. But they really didn’t understand what a bonanza this was going to be for them.

KESTENBAUM: Turns out, doctors had been giving out a lot of free care to old people and now they were going to get paid for that, and within limits, whatever they asked for.

So Government intervention crowds out pro-bono charity work. Who wouldn’t take money for something they were doing for free anyway right?

Dr. LUCIAN LEAPE (Surgeon): We found out what the general fee for our service was and charged that or maybe added 10 percent, ’cause of course I’m better than average. And so it was an incentive for doctors to charge what they thought was reasonable for them, and then of course to increase it every year by, say, 5 or 10 percent.

KESTENBAUM: Medicare solution for how to pay doctors put into cement this idea of fee for service, paying doctors per procedure for every test, every scan. That sounds reasonable, but it served as a nudge to err on the safe side – to do more tests, to do that exploratory surgery.

JOFFE-WALT: LBJ and Califano, all their people, all realized they created something of a monster right away. I mean, two years after Medicare passed, LBJ is pleading with Congress to let him change the way Medicare pays physicians.

It only took two years for reality to hit the politicians. When you pay doctors for every little test, some of which they used to do for free, costs go up. Any person with an ounce of common sense could figure that out. No wonder the politicians couldn’t figure it out.

Mr. CALIFANO: I know it. But we saw what was happening with costs so fast. So fast.

KESTENBAUM: But they couldn’t change it. Doctors now like the system. They were getting paid for work they’d previously done for free. And that was that. This system, with all its problems, stayed in place for almost 30 years. Meanwhile, medicine got more expensive.

So you have a system in place with rampant price inflation, created due to Government interference with the market. So what does the Government, in it’s infinite wisdom decide to do?

KESTENBAUM: And yet, in 1986, one man was convinced he could calculate the prices. An economist at Harvard by the name of William Hsiao; an economist with a small voice and a big, kind of weird idea.

Professor WILLIAM HSIAO (Harvard University): So the question is: Can we find a rational method that could be used to set physicians’ fees?

Now this next part is the best. Anyone read their Das Kapital lately, if you did you’ll recognize their solution right away.

JOFFE-WALT: Professor Hsiao decided, okay, the market does not work for health care services. So I will calculate the right prices for each and everything a doctor does.

Sound familiar?

KESTENBAUM: Hsiao brought in groups of doctors and asked them some pretty crazy sounding, almost philosophical questions like: How much mental work does a regular checkup require? He had them compare everything they did to one reference point. For surgeons, it might be a hernia repair: How technically hard is it, how stressful, how many supplies? Hsiao had doctors do this for thousands of procedures.

JOFFE-WALT: While Hsiao was creating his Relative Value Scale, he’d invite groups of doctors in to advise him. And the doctors would bring their own advisors, consultants – lobbyists, really. Hsiao wouldn’t let them in the room, so they’d sit outside. And then those consultants started coming out with their own relative value studies that were more favorable to whatever group of doctors they represented.

Relative Value System? Using measures like mental capacity, equipment used, stress….well it’s our old old friend the Labor Theory of Value, the workhorse of every Marxian economist.

You might want to ask Russia, Cambodia, Cuba and North Korea how well that has worked for them.

JOFFE-WALT: In 1992, Congress adopted Hsiao’s Relative Value Scale, that enormous spreadsheet. And it worked for a while until just a few years later, it didn’t anymore.

Gee I wonder why it didn’t work anymore? Maybe it’s because you can’t set arbitrary prices and expect efficient use of resources? If they would have read their Mises and Hayek, they would have known that an arbitrary price system doesn’t and never will work. (If they had read their Mises and Hayek, they’d have seen the Housing bust coming too.) It’s the Economic Calculation Problem. It’s the reason why every socialist economy is doomed to failure.

Don’t believe me? See how well off they are in Cuba, or North Korea.

Anyway, the point of this post is that Government interference makes the problems much worse than they otherwise would have been. Markets aren’t perfect, but they are a thousand times better than government planning. Also, we can see how Government intervention directly causes rent seeking. The best part of the whole piece is that it was from NPR!

I consider it a good use of my taxpayers money to show the public how inept and asinine government intervention really is. Unfortunately, I think that message will be lost on most Leftists and Statists. Instead of saying; “Man, it worked better before the Government got involved.” They will be sayings something like, “Man, We need more government intervention because the first round wasn’t enough!”

Where have I heard that?… Oh yeah…it’s the same logic they use for needing more stimulus.

If they’d only read their Mises and Hayek…..

Will Default or Inflation fix Social Seccurity woes?

February 22, 2010 12 comments

“Social security is an obligation the government has to it’s people.” I agree, but the Government isn’t above the law of finance. If they can’t pay for it, then they will default; either through outright default ( say “tough shit and deal”) or through inflation.

The “tough shit” approach will hurt seniors but that’s it, anyone not getting SS benefits will just have to start saving themselves, which will lead to economic growth, under a simple Solow model. But, it’s politically unfeasible. Seniors are a dedicated voting block and have their own self-interest first and foremost.

I don’t blame them either. They paid in, with the promise of a return by the Fed Government. In theory, that promise should have been good. In practice, that promise was meaningless as soon as the Government started paying other people off with SS money.

Inflation will hurt everyone and in the long run is more harmful than anything else. Unfortunately, it’s the most politically appealing path. Inflation is a creeping tax. Government use it because it decreases the purchasing power of the currency, so a Government pays off it’s debts with worthless paper.

Charles Rowley, economist at GMU , explains it well.

There are only three ways for a government to cover the cost of its spending: debt, regular taxes, and inflation.  Because regular tax increases cannot be hidden, at least easily, they tend to be vote losers, to be resorted to only as a last resort, and even then, only in a discriminatory manner designed to impact adversely on a small minority of voters. Because increased debt is less transparent to the voters, and therefore, politically feasible, deficit-financing tends to be the preferred instrument, up to the point where  its burden becomes apparent to the international community. At that point, inflation tends to comes into play, as governments scramble to reduce the real burden of the debt by debauching its currency.

When the currency is worth less and less, those on fixed incomes are hurt more and more. Prices go up in times of inflation, ask anyone around during the Carter years. Fixed incomes do not. The Government does not index SS benefits with inflation, they merely vote in a cost of living increase.

Here is some news for you, that COL increase is worthless. It’s measured using a flawed CPI number. I say flawed because it excludes such trivial things as energy and food. We all know how meaningless those things are right?Also, the weighting of the basket of goods is all off. It give a higher weight to goods that are falling in price rather than those rising in price. It’s akin to having 100 people; 90 Democrats, 4 Greens and 6 Republicans and finding the average approval for Bush. It’s not going to be an accurate representation.

From ShadowStats:

The Boskin/Greenspan argument was that when steak got too expensive, the consumer would substitute hamburger for the steak, and that the inflation measure should reflect the costs tied to buying hamburger versus steak, instead of steak versus steak. Of course, replacing hamburger for steak in the calculations would reduce the inflation rate, but it represented the rate of inflation in terms of maintaining a declining standard of living. Cost of living was being replaced by the cost of survival. The old system told you how much you had to increase your income in order to keep buying steak. The new system promised you hamburger, and then dog food, perhaps, after that….

The BLS initially did not institute a new CPI measurement using a variable-basket of goods that allowed substitution of hamburger for steak, but rather tried to approximate the effect by changing the weighting of goods in the CPI fixed basket. Over a period of several years, straight arithmetic weighting of the CPI components was shifted to a geometric weighting. The Boskin/Greenspan benefit of a geometric weighting was that it automatically gave a lower weighting to CPI components that were rising in price, and a higher weighting to those items dropping in price.

Once the system had been shifted fully to geometric weighting, the net effect was to reduce reported CPI on an annual, or year-over-year basis, by 2.7% from what it would have been based on the traditional weighting methodology. The results have been dramatic. The compounding effect since the early-1990s has reduced annual cost of living adjustments in social security by more than a third.

People on fixed incomes or low incomes spend the majority of their money on food and energy. So an increase in those two things, which aren’t part of CPI or COL, will negatively impact the standard of living of those people. Are seniors better off with that?

It’s a difficult question to face; default or inflation. I’m more inclined to argue for default. Sovereign default means that the people in charge and the people the caused the mess will be held accountable, to a certain extent. Inflation just mean pawning it off on the next guy.