Killing health care

July 25, 2009

On the continuing saga that I’ve been chronicling…

It’s all got to do with shifts in the economy. Even before the recession hit, employer-sponsored health coverage had been steadily shrinking, and many people couldn’t afford the premiums for individual policies. Meanwhile, government programs have been expanding — and they’ve gotten increasingly friendly to private insurance companies. Insurers now play major roles as middlemen in Medicare, Medicaid and the children’s insurance program.

And if the government requires everybody to get coverage — just what the overhaul legislation calls for — it could guarantee a steady stream of customers subsidized by taxpayers not only for insurers, but for all medical providers.

Let’s see, private insurance is shrinking as government programs expand.  This is EXACTLY waht happens with government intervention.  It pushes out private firms.  Period.  By the way, that’s not a bug, it’s a feature, for leviathan at least.

And the private firms are getting increasingly friendly to government.  Well that should come as no surprise, neither that they are unhappy with the forced stream of “customers”.  This is called rent seeking.

Ever wonder why health care is in such need of “reform”?  It is because the more government involves itself into this, or any market, the more distorted it becomes.

This is most surely a causal effect.

So, what do our overlords have in store?

The House version, modeled on Medicare, would pay doctors and hospitals less than private insurance.

That’s going to work out perfect.  Because, as we all know, medicare is such a wonderful program.  This is how you kill health care, or any other market.  Just get government involved.

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Why all the rush

July 23, 2009

The fit is hitting the shan or something like that:

Dateline July 23, 2009

The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 29% of the nation’s voters now Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-six percent (36%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -7

Fifty-three percent (53%) now oppose the Congressional health care reform package. That’s up eight points over the past month. Just 20% now see health care as the most important of the President’s priorities. Nearly twice as many, 37%, say deficit reduction is most important.

Republicans continue to enjoy a slight edge on the Generic Congressional Ballot.

Republicans continue to enjoy a slight edge on the Generic Congressional Ballot.

As for the last point, it’s not like the republicans would be any better.  Couldn’t be worse though.

But it appears his holiness from on high, he who came to save us with hopenchange, the one, the obamaessiah, is um, appearing a little mortal.  They know they have until the recess to accomplish the socialist objectives.

I’m reminded of Yamamoto’s observation regarding Pearl Harbor.  He said that he’d run wild for six months then after that, it’d be all down hill from there.  He was right, almost to the day.  Pearl Harbor was 12/7/41 and the tide turned irrevocably on June 4/5, 1942 at Midway.  I rather suspect this gang in DC knew they had 6 months.

They do know, and make no mistake about it, they truly do know, how important it is to “reform” health care.  Not only is it such a large sector of the economy, if that wasn’t enough.  But from there, everything else flows.  Once you dictate (and yes, that’s the proper choice of words) health care, you have complete control over them.  Once you take that over, then there’s never returning to a market based system, no matter how broke we are.  It was their great gamble, one that hopefully they will lose.


5 Year plans

July 23, 2009

5yearplanIsn’t this nice.  I’d expect to see a large factory filled with happy, smiling workers.  And a picture of Stalin smiling.


Why O-care will fail miserably

July 21, 2009

I have been reading (well, re-reading actually, it was just a very long time ago that I first read it.  Then however, much of the book was a little beyond the full scope of my understanding, though now much later and with much better knowledge, its much more lucid!!) Hayek’s Pure Theory of Capital and this particular passage really hit home:

In the vvvvvvcvzfv d fdfsecond place, the resources available for the satisfaction of these wants will be unevenly distributed between the individuals. As a rule, we shall find that most individuals do not command all the resources which, with the technique actually in use, are required to carry on the continuous production even of a single commodity. Usually we shall find that the resources required for anyone process of production are divided between a number of persons. In most cases equipment belonging to different stages of one process of production will be in different hands. And some at least of the permanent resources whose services are required in the different stages, certainly human labour if no others, will be under the control of persons other than those who own the material equipment and direct and organise production. In consequence it will be necessary to exchange not only different final products but also intermediate products and the services of resources of all kinds.sdfasdfadsfadsfadsfasdfas

In the second place, the resources available for the satisfaction of these wants will be unevenly distributed between the individuals. As a rule, we shall find that most individuals do not command all the resources which, with the technique actually in use, are required to carry on the continuous production even of a single commodity. Usually we shall find that the resources required for anyone process of production are divided between a number of persons. In most cases equipment belonging to different stages of one process of production will be in different hands. And some at least of the permanent resources whose services are required in the different stages, certainly human labour if no others, will be under the control of persons other than those who own the material equipment and direct and organise production. In consequence it will be necessary to exchange not only different final products but also intermediate products and the services of resources of all kinds. (pg. 249)

Let’s examine this brilliant description of the highly complex capital structure in relation to health care.

Last year after my son broke his arm, we went to a pediatric trauma care center (no, it wasn’t that bad.  He didn’t even really cry at all.  Kids break, they heal.  It happens.  Harder on parents than kids for sure!!), a pediatric orthopedic center, and a hospital (he had to have a pin put in).  The titanium rod alone, its lifespan from the ore to the arm, would probably be a story even more complex than Leonard Read’s pencil.  Everything from the xray to the cast, each is a story unto itself in complexity.

There is no doubt that the titanium used in the pin in his arm could very well have been utilized in any thousand other ways and products.

I shudder to think that these “geniuses” in Washington truly believe that they are capable of managing this vastly dispersed capital structure which creates the most miraculous medical care in the world.  Have they no humility?

Of course, when capital is homogenous and fixed, and labor is the sole physical unit which is required in the economic system…


Of course, economic stupidity, and theft

July 19, 2009

White House’s $50B foreclosure plan a bust so far

“It’s just hard to explain to the working families in America how it is we could move so fast with extraordinarily complicated deals with the huge financial institutions, and we are moving so incredibly slowly, mired in paperwork, in rules, in talking to banks back home,” said Sen. Jeff Merkley (D-Ore.).

Of course.  Homeowners don’t have billions to go rent-seeking.

“Everybody understands that getting out of this broader crisis requires that we stabilize our housing market and stem the tide of foreclosures,” Senate Banking Chairman Chris Dodd (D-Conn.) said in a hearing Thursday. But in unusually harsh words for a Democrat, Dodd said that the Obama administration’s progress in stopping foreclosures has been “disgraceful” so far.

Economic stupidity.  Real economists know that prices are the signal to producers and consumers.  Foreclosures have nothing at all to prices.  And neither do home prices have anything to do with the “crisis”.  They are the effect, not the cause.  Furthermore, wasn’t “affordable housing” long a goal of Dodd’s party?  What the hell is he so upset about now that housing is far more affordable.

Ah, but the best for last.

The Center for Responsible Lending, a nonpartisan research and policy organization, projects at least 2.4 million additional foreclosure starts this year, causing nearly 70 million surrounding households to lose a combined $500 billion in property value.
The group estimates there will be 9 million foreclosures through the end of 2012, at the cost of $2 trillion in lower home values — enough to pay for the House Democrats’ health care plan, twice.

The Center for Responsible Lending, a nonpartisan research and policy organization, projects at least 2.4 million additional foreclosure starts this year, causing nearly 70 million surrounding households to lose a combined $500 billion in property value.

The group estimates there will be 9 million foreclosures through the end of 2012, at the cost of $2 trillion in lower home values — enough to pay for the House Democrats’ health care plan, twice.

Non-partisan, huh?  Nothing was, or will be, lost when home prices fall.  Period.  It is not, nor ever was, wealth.  Period.
And how exactly will $2 trillion in lower home values “pay” for O’s health care.
Theft.

Hyperinflation

July 17, 2009

This much I do know.  Using the bls.gov inflation calcuator $100 in 1972 (since Nixon removed us from the last vestiges of gold Aug, 15, 1971, the first full year free from the “barbarous relic” would be 1972.  That would give us a better idea the perils of fiat money.) has the same buying power as $516 today.  That’s hyper inflation by any sensible standards.

Let’s not forget this graph for a moment:

fed_our_money

For money to lose more than FIVE TIMES its value during the course of my lifetime is hyperinflation and wealth destruction of an order of magnitude unseen in the country’s history.  However, I wanted to investigate somethings further.

Now, what piqued my interest was that the 80’s and 90’s were rather unique in the technological changes that occurred.  (Of course, that did all come crashing down with the massive bubble in the 2000’s and the terrible malinvestment.  And we wonder why growth has stagnated!!)  Technology increases productivity and lowers costs of production.  We hadn’t seen anything like that type of real economic growth since the 20’s (which was also destroyed by a fed induced malinvestment bubble.  Gee, who said history repeats itself???).

So, I wanted to cut down some time frames and look a little deeper into the inflation.

The first thing I looked for was productivity.

productivityUnfortunately, the data only goes back to 1986.  But you can see why I will choose 1992 as the delineating year on inflation.  From the mid 80’s until 1992, productivity was basically flat.  So, that should give us a fairly decent picture (and remember, I am not a university professor with years to dedicate to research.  Would be nice though!!) although much more in depth and detailed measurement would surely help.  However, I do believe that the overarching picture would only be augmented by such further inquiries.

Now, $100 in 1972 has the same purchasing power as $335 in 1992.  That is unbelievable.  Well, actually it’s not at all when one realizes what happened to our money.  Anyways..

Two decades later and money was worth 30% of its original value.  Granted, the inflation fighting ways of Paul Volcker went far to keeping it from being much, much worse.  Of course that’s like having 100 people swinging sledgehammers and knocking down a wall to only having 40.  Better, but the wall is still being destroyed.

Without the further data to confirm, I would take, for argument sake, the productivity for the entire term in question (’72-’92) to be flat.  Yes, there were oil shocks and such, and it’s probably closer to reality that productivity increased somewhat between 1972 and 1992, but that only serves to illustrate the point further.  Productivity increases dampen inflation, so it would have been far, far more pronounced.

Now that takes us to 1992 to the present.  $100 in 1992 has the same purchasing power as $153 today.  That’s a remarkable turn of events, or so it seems.  That was where I had some serious doubts as to the true nature of real inflation.

Side note: I am referring to inflation as by its general usage, that being a rise in the general price level.  But, Austrian theory is clear on this major issue.  Rising prices are the result of inflation, inflation being the increase in the money supply.

So, I found this rather odd.  In spite of a a huge increase in productivity, we still had significant increases in prices.  Of course this did not apply to every area of the economy.  This certainly was not the case for instance with personal computers.  A decade ago, a decent laptop was priced at $2000, while today one can be purchased for one third that price.  Or less.

Now, that would imply that a decent laptop a decade ago is similar to a decent laptop today.  What has happened in reality with laptop (and all) computing is that a decade ago we purchased a Sopwith Camel for $2000 while today we are purchasing an F16 for a third the price.

So, with an economy more heavily dependent on technology, communication, information, and the productivity gains that this new computing power wields, how is it possible that we’ve still had such increase in prices?  Logic would dictate that we’d see something comparable in almost every sector of the economy.  I’d well expect the petty deflationistas to get ruffled and proclaim that falling prices across the board are a serious problem.  But if our tech companies are not suffering, how then would all companies suffer?  And they’ve prospered in spite of falling prices in their sector coupled with rising prices most other sectors.

Imagine if prices fell across ALL sectors.  Imagine how much wealthier and prosperous we’d be today.

Thus, our productivity gains must have had a tremendous dampening effect of price increases.  In fact, I doubt only but the staunchest of labor theorists would dispute this point.  So, let’s take a moment to speculate on where we’d otherwise the massive improvements in technological and productivity gains.

First, let’s examine (yes that graph again) what has happened to the money since the mid 1990’s.

fed_our_moneyFocusing just on M2 we discover there was a significant increase in money from 1995 onwards.  Had the Fed just kept on the current trajectory, there well may have been “deflation”, but our good Keyesnian overlords wouldn’t allow for that.  So, given the highly inflationary policies of the Fed (which of course DID lead to massive inflation and bubbles in housing and stocks, and thus the terrible bursting) one ought to be shocked that prices only increased as little as they did.

Assuming the relatively flat productivity growth extended out into the 90’s and beyond, what might our inflation looked like then?  That is anyone’s guess, however, if we consider that in just two decades prices tripled, is it unrealistic to argue that sans the productivity, we’d be looking at a CPI over 900?

That doesn’t factor into account the massive increase in money either (more than doubling of the money supply from 1995 to 2008).  Perhaps 900 is a lowball estimate.

All this must be considered in light of more recent trends and proposed legislation.  One, US productivity has not kept up its rapid pace, in large part to pernicious acts like Sarbanes/Oxley.  Secondly, the massive housing bubble diverted untold resources from productive to non-productive ventures for many years.

res_v_nonresFor clarification, that is the graph which shows relative percentages of non-residential (productive) investment to residential (non-productive) investment.  Productivity gains correspond to increases in non-residential, and the housing bubble is clearly evident as well in the huge “bubble” of increased residential investment.  As all those houses and accompanying strip malls sit idle, don’t expect much new productive investment to happen in the near, or distant, future.

Here’s something to ponder:

net-nonresAgain, the data was taken from the bea.gov website, and corresponds to the graph 5.2.6 of the NIPA tables.

So, not only did the housing bubble correspond to a massive drop in productive investemnt, but it also corresponded to a massive decline in NET productive investment.  Net non-residential investment means capital depreciation and replenishment is subtracted out, thus giving us the clearer picture of how much NEW capacity is being created.

Although it is surely increasing as of the past few years, we are still a long ways off from long term trends of real growth.  And here’s where a simple percentage graph doesn’t truly demonstrate the carnage.

investemnt_latestPrivate investment is in freefall.So, any increases in net non residential investment are not only as a percentage, still low, in real dollar terms, they are horrific.

So, we are already starting from a diminished standpoint.  Next, we have to contend with the readjustment and misallocation of resources, the unproductive and unused stock that has to clear.  All this is going to take some time.

Add in to that the massive tax increases that are coming to deal with the debt, as well as crowding out the markets for loanable funds, the nationalization of industry, the cartelization of the financial sector, the major health care overhaul that is surely to drive up the cost of production, and the looming cap and trade environmental burdens on the horizon.  Then factor in things like Employee “Free Choice” and greater union thuggery (unless the O’s giving Chrysler to the unions was a one shot payoff!!  Nope, the UPS deal is coming.)  with all the coming regulations and oversight and bureaucratic nightmares businesses will face.

Out of that scenario it is absolutely impossible to see any type of productivity gains coming, even a fraction of the kind that prevailed in the 90’s.

Then, when you see hat has happened to the money the last year:

moneybaseHyperinflation will be an understatement.

But the good news is that “yes, we can” spend out way to prosperity.


We have to destroy the village…

July 17, 2009
Biden: Without Stimulus, U.S. Would Go Bankrupt

Without Stimulus, U.S. Would Go Bankrupt

“People, when I say that, look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?” he said. “The answer is yes.”
Since I don’t know whether to laugh or to cry, I guess I’ll have to do both.
Biden credited the recovery package for thawing the credit freeze that stifled loans and left businesses unable to borrow or, in some cases, survive.
He said it saved thousands of jobs of public employees, including jobs in schools, fire departments and law-enforcement, and punctuated his point by announcing $1.6 million in new federal stimulus cash for Richmond’s police department.
What was it that the O said, “working as intended”?  Yes, I do believe it is.  I guess those are what he meant by jobs “saved or created”.

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