Posts tagged with Health Care + Policy

Has Stimulus Failed? Take Two

The newly elected president was left with an economic mess. The bad policies of the previous administration and unwisely taking the country to war had left the economy in trouble, with high unemployment and declining GNP. The new president decided to implement a drastic change in economic policy not long into his first year in office and was roundly criticized by his opponents. However, by August signs of recovery were already visible. August of 1921, that is. By the next year unemployment had been cut in half, and a year after that it was down to 2.4 percent after being 12 percent in 1921. The Harding administration had cut government spending in half, cut taxes and reduced the national deficit. Meanwhile the Federal Reserve kept interest rates high, thus keeping inflation down.

It's almost been a year and a half since Obama's stimulus package was passed, and have we seen comparable results? Not even close. At what point in time are stimulus supporters going to admit this policy was a mistake? The thing is, there's a playbook out there that worked. Cut down the size of government, reduce the tax burden and quit crowding out private investment with government debt. The Obama administration has gone the exact opposite direction and we aren't seeing the results. The gains in the stock market and housing prices are being offset by the declining value of the dollar. Private investment and savings continue to decline while public debt soars to new and frightening highs.

The excuse for failure so far has been that Obama was handed such a mess that recovery is difficult. Certainly that is true, but at some point in time the policies we are following will have to be examined and declared successful or failures. I would like to know how long it will take. I am suggesting two years, since that is how long it took the Harding administration to arrive at complete recovery from the depression of 1920-21.


Getting Used to Socialism

Reading the comments regarding the state-wide smoking ban in Kansas I came across one particularly poignant comment, the gist of which was that smokers will complain, maybe a few will boycott, but eventually they'll get over it and get used to it. This is the sometimes sad, but true, nature of human beings. Getting used to things is a key to our species success--we can adapt to all kinds of conditions. We can get used to all kinds of hardships, and the incremental creep of government control is made possible because of this.

We get used to filling out required paperwork, we get used to taxation, we get used to our dollar losing value, we get used to the rising cost of health care, we get used to increased government control of our businesses, property, lives and bodies. Only instead of adapting to natural problems like droughts and diseases, we are coping with infringements upon our liberty by our fellow man.

In Libertarian circles there is a belief that the recent increase in interest for libertarian ideology, free market economics, the rising popularity of Ron Paul and the discussion about the importance of liberty and the threat posed by government signal a changing wind which will move the country back towards increased freedom and away from increased government. I, however, am not so optimistic. I think this is only a temporary uptick but that people will get used to the changes being made to our country and "get over it," so to speak. In the Soviet Union people got used to cold apartments and waiting in line for food. In the UK people have gotten used to waiting for health care. In the US, we too have gotten used to the hardships brought about by the creep towards socialism.

I think history has shown that it is only when the government is weak or the people begin to starve that revolution occurs. Our government certainly isn't getting any weaker, and considering the main problem with US agriculture has always been overproduction, it will take a long time before our economy is so ruined that we begin to run out of food. The cycle of boom and bust economics will continue, our economy will deteriorate further as the government increases control and spends its way into more and more debt. People will get upset when the next big economic crash comes, but not as upset as they were before. Eventually we'll all just get used to high unemployment, lower wages, and a lower standard of living. As government continues to take control of more sectors of our economy, starting out with healthcare, education and transportation it will spread to other sectors. Shortages will become common and people will get angry, but then they'll get used to it.

It'll only be when food starts running short that people will finally stand up for themselves, because you can't get used to starvation.


Support or Reject the Tea Party?

The Tea Party movement is primarily an anti-tax one. The supporters don't mind big government if it's for warfare or welfare like medicare and social security. So they like government, they just don't want to pay for it. Debt is generational theft--this generation lives high on the hog off of government goodies, while the next generation gets stuck with the bill. Of course now that bill is becoming so large that it will soon be no longer possible to pay it off. Eventually people will stop lending the US government money, at which point either the spending spree will be over, or the Fed will try to monetize the debt causing hyperinflation, and the spending spree will be over just a little bit later. Either way, the US as we know it will be over.

The question is, should supporters of Liberty and Small Government support or reject the Tea Party? On the one hand, the Tea Party movement is the closest thing we have to a large-scale anti-government movement going in the US right now, and the statist interests have lined up to denounce it. Certainly they may help propel some Libertarian candidates into office, or support a Ron Paul bid for the Presidency. But on the other, they support most of the government institutions that generate the need for heavy taxation and intrusion into liberties, both economic and personal. Can they, over time by spreading information through public figures like Ron Paul, come to see that they can't have their cake and eat too, that they can't have low taxes and the warfare/welfare state? I think the answer is no.

The reason for this is looking at the demographics of the movement--I believe the average person is over 50. With people at the end of their working careers and about to enjoy the fruits of government programs to assist older people with health care and living expenses for retired people, they really have no economic incentive to reduce the apparatus of Big Government but cutting spending. They are at their peak earning years, and therefore want low taxation but no reduction in benefits, shifting that cost to someone else--namely future generations. The great hope for true believers of Liberty is on college campuses--young people who are about to enter the job market, who will be most affected by the national debt and, with the least experience, most likely to suffer from the high unemployment rates that govenrment intervention causes. I just don't think the Tea Party, with people like Palin as speakers, has much hope of morphing from an anti-tax movement into an anti-big government movement.


Obama Fiddles while Rome Burns

Who will save us from these madmen (and women) in DC? Whatever the merits of this new healthcare bill, it does nothing to address our trillions upon trillions in unfunded liabilities. Social security is running out of money. Medicare is running out of money. Those programs were supposed to be "revenue neutral" as well, but anyone with a rough knowledge of history knows government entitlement programs have a way of running out of money. Cash for clunkers lasted how many days before it ran out of money? Now we have yet another program that will surely exceed its anticipated budget. Add on top of this we are facing possible runaway inflation as the dollar's value continues its march towards zero and we are still in a recession with real unemployment approaching 20%.

Do these people want to bring about the end of this country? The federal reserve is desperately trying to reinflate the housing bubble, but it just isn't working. Instead it's only leading to inflation--the backdoor tax on the middle class, poor and elderly living on fixed incomes. The same people who accurately predicted the 2008 recession but were ignored are now predicting a dollar crisis that will come in the next few years. Not surprisingly, they are being ignored again. We are headed towards the cliff of an even worse disaster and instead of listening to reason our government is increasing speed with this new healthcare bill. Even if the republicans retake Congress, they won't change course, they won't put an end to all the spending--we know this from experience.

It's not too late to fix things, but I fear those in power who think they see a light at the end of the tunnel will stay the course until the oncoming train runs us over.


In Defense of Capitalism

There are several common objections one hears to capitalism and economic freedom. So in this blog I hope to address the main ones and any additional ones brought up in the comments:

A. Capitalism exploits the poor.

Under capitalism the rich get richer and the poor get poorer, or so goes the argument. But this is factually incorrect. Let's examine how factor payments are distributed in an economy. They can go to three places: owners of capital, owners of land, or to wage laborers. Now the criticism says that all the additional factor payments will go to the wealthy owners of capital and land at the expense of wage laborers. According to Marx and Engels, the product of the wage laborers will be expropriated from them by their evil capitalist masters who will continue to accumulate more and more wealth. If this were true, then we should see massive increases in land rents and massive increases on returns on capital and relatively stagnant real wages. Looking at England as an example, land rents and returns on capital today are roughly equal to what they were 800 years ago. ^1 Thus returns on land and capital hasn't changeed much. Who were the big winners from industrialization? Unskilled laborers. Returns on capital: flat. Returns on land: flat. Wages for unskilled laborers grew explosively. ^1 So while capitalism made us all better off, it particularly benefitted unskilled laborers. The main benefits of capitalism in terms of the cost of goods wasn't a decrease in the price of silk stalkings for the queen, but in the price of silk stalking substitutes for the working class women. Today a cup of coffee, computers etc. are all much cheaper and affordable to the majority of the population in capitalist-based countries.

B. Capitalism distributes resources unequally

OK, maybe under capitalism unskilled workers are better off, but the highly skilled, uber-rich are becoming fantastically wealthy. The money income going to the rich is much much higher than the money income going to the relatively poor. There are a few problems with this argument though, the first being how we measure inequality. As a society gets richer and richer, the distribution of income becomes less and less reliable as a measure of inequality. This is because the technological quality of the goods and services that are available to the very poor will come to resemble the technological characteristics of the goods and services available to the very wealthy. Take wine for example, which can get very expensive. Is it really that unequal that Bill Gates can afford to have $2000 wine with his dinner, and the average poor family would have to buy a bottle of Charles Shaw Vineyards' awarding winning Two-Buck Chuck from Trader Joe's for $2 a bottle? While the expensive wine may be 1000 times more expensive, the characteristics of the cheap wine available to the poor are a reasonable substitute for the goods available to the wealthy. The resources available to the poor today are much closer in quality to the resources avaiable to the wealthy than, for example the resources available to Louis XIV and a starving peasant.

C. Unchecked Capitalism leads to undesirable things like Child Labor

If there weren't any laws against child labor, then there'd be children working in sweatshops, and we cannot allow such things to happen by letting capitalism run free. Actually it is because of capitalism that we no longer have child labor. Prior to the industrial revolution, it was a fact of life that children worked. If they didn't, they and their families risked starvation. Only until the improvements in productivity brought about by capitalism did the production capacity of parents so increase that children no longer had to work.

D. Capitalism is structurally sexist and racist

Without laws against racism and sexism, employers will discriminate based on sex and race in a completely capitalist free market economy. Actually capitalism punishes racism and sexism. By refusing to hire productive workers or pay them wages equivilant to their marginal utility, what will happen in a capitalist economy? Their competition will simply hire those the discriminatory employer will not and outcompete him, leading to decreasing market share and eventually failure as a firm. One example is that railroad cars were not segregated prior to Jim Crow laws. It simply cost too much to have one half full whites-only car and one half full blacks-only car than to have one full car. Capitalism defeated racism until racists agitated with the government to enforce racism. Some may object that the kind of economic punished capitalism dishes out to racists and sexist is not great enough or too slow working, but one thing is true--it never fails to punish these offenders. If the police is made up of Klan members, or the Judge is a racist, government punishment may be escaped.

E. Capitalism destroys the environment

Capitalism is the process by which we extract material resources from Mother Earth and lay waste to the environment. Actually, private ownership of the means of production gives us the incentive we need through rational economic calculation for meaningful stewardship of environmental resources. For example, in Zimbabwe the government redistributed farmland from private hands to the politically well-connected and to communal farms. Here is a picture showing the scorched Earth that is the communal farms on the left and the still lush farmland that is privately owned on the right:

F. Some things are too important to be left to the free market

While we can let the market take care of things like computers and toilet paper, other things like health care are too important to be left to the market. Short answer is that given what we know is possible in a capitalist economy and a centrally planned or heavily interventionist economy I would say health care is too important not to be left to the market. If you've ever lost a family member or been really really sick then the fact that health care technology has not progressed to where it would be in an unhampered market becomes very relevant to the condition you are in. One strangely popular myth is that the US has a completely unregulated, unfettered health care market and thus all the problems that exist are associated with capitalism. This simply isn't true as the government pays for the majority of health care costs. Health insurance isn't really insurance but due to regulations is instead pre-paid health care with very low marginal costs for treatment. Courts have ruled that health care benefits are not wages and thus they weren't subject to the wage controls implemented during WW2. Add on that such benefits are tax-free compensation and a growing amount of people's wages were being received in the form of health care benefits. Regulations and massive subsidies mean that instead of a free market in health care what we really have is uber-interventionist health care.

G. Capitalism is just...gross

Sure, capitalism delivers the goods, but it's cheap crap from Wal-Mart. Capitalism doesn't help a man live a noble life and isn't aesthically beautiful. Instead of spending your time reading and reflecting on great books, you're shopping for Darth Vader sippy cups. You're spending too much time with the Mario Bros. on your couch than with your family etc. Well, if one disagrees with capitalism on aesthetic grounds it's really a matter of opinion. But capitalism never produced a death camp. Capitalism isn't censoring websites in China. The free market didn't kill a quarter billion people in the 20th century. So if we're talking about which system is elegant and beautiful, I would like to think that the one which produced the death camps, censorship and mass murder would be the one that loses.

^1 From a Farewell to Alms, a Brief Economic History of the World by Greg Clark


US Life Expectancy Actually #1 Some charts


The Free Market Solution to Fixing Health Care

It's a common assumption that our current health care system is a free market one and that it's broken, thus we should try a government system. However this couldn't be further from the truth, as government is already involved at every level, from licensure and patents, to direct subsidies and provision, to employee mandates and insurance-pooling. This intervention is precisely what accounts for most of the problems people complain about--particularly the high cost. Meanwhile the private dimensions are what account for our systems merits as we are the leading nation when it comes to innovation, coming up with new procedures, medical devices and pharmacueticals that lengthen and improve people's lives.

We are going in the opposite direction of where we should be going: more control instead of more freedom, more spending instead of less, more mandates instead of fewer. The problems we have are being addressed by more of what caused the problems: the patient is being given more poison instead of the proper cure.

Here is the Free Market Solution to fix health care:

  1. Eliminate all licensing requirements for medical schools, hospitals, pharmacies, and medical doctors and other health-care personnel. This would result in a steady increase in supply which would cause prices to fall and the variety of health-care services to increase.

  2. Eliminate the FDA and all government restrictions on the production and sale of pharmacueticals and medical devices. Prices would fall and life-saving products would reach the market much sooner. A free market would allow consumers to assess risks on their own without the government doing it for them. Competition and products liability suits would cause sellers to offer increasingly better product descriptions and guarantees.

  3. Deregulate the health insurance industry. Because a person's health lies increasingly within his own control, many health risks are actually uninsurable. You can't get insurance against suicide or bankruptcy because it is in your own hands to prevent or bring these things about, yet uninsurable risks are covered by government mandate, driving up costs. In addition health insurers cannot discriminate between various groups of people who pose significantly different insurance risks. Hence it is really a system of income redistribution that benefits irresponsible actors and high-risk groups at the expense of responsible individuals and low-risk groups. Because of this, prices continue to balloon.

  4. Eliminate all subsidies to the sick and unhealthy. Subsidies create more of whatever is being subsidized, subsidies for the ill and diseased promote carelessness, indigence, and dependency.


Why Deregulation isn’t Deregulation

Whenever I talk about deregulating our economy a common response is that without regulations society would fall apart. The environment would be trashed, our food would be poisoned, houses would fall over etc. In this fictitious world of lawlessness where humans fall prey to the ill-considered actions of their fellows it is no wonder that the government is necessary to prevent these harms. However, this does not resemble reality.

In the real world human action is always subject to regulation: by custom, by ethical and religious beliefs, and by the common law. Tort law is exactly that part of the law that has evolved to protect individuals and their property from the harmful actions of others. It is only by ignoring these forms of non-political regulation that one could possibly believe that the government is necessary to prevent the imagined slew of harms that would fall upon us.

Some might argue that tort law is retroactive as a regulatory scheme, only coming into play after an injury has taken place. Thus proactive regulation is needed to prevent these harms. Really? The basic rule of tort law prohibits people from intentionally causing harm to others and requires people to act with reasonable care to avoid causing harm accidentally. There's nothing retroactive about that. What precisely is reasonable care may have to be decided on a case by case basis, but that's no different than having the government promulgate a general rule and leaving it up to the courts to determine how it applies to specific cases. In addition, government regulation is almost always retroactive as well. Megan's Law is called that because it was enacted after Megan was killed by a repeat sex offender. The Patriot Act was enacted just after 9/11.

Not only is political regulation inefficient and an unwarranted restraint upon our liberties, as I have shown it is unnecessary as well. Deregulation does not mean a free-for-all, far from it. As an example I will recall the lady who successfully sued McDonald's over the hot coffee burning her. While most restaurants kept their coffee at around 180-190 degrees, the very next day after that suit restaurants around the nation began keeping their coffee at around 160 degrees, the point at which you have enough time to wipe it off before it seriously burns you. No legislation had to pass, no government employee has to go to restaurants around the country, thermometer in hand checking coffee temperatures. This is a perfect example of how regulation works in a "deregulated" free market--efficiently and freely.





Mandatory Drug Screening for Expecting Mothers? Infants born from mothers who used drugs during their pregnancy are 8.4% more likely to have health problems when they are born. An idea has been proposed in order to improve the health of these babies: mandatory drug screening during prenatal care. The idea being to test all the mothers for drugs, and to give counseling for those who are taking drugs so that they will stop, and thus improve the health of their baby. The drug tests are relatively cheap--only about $20 each--so overall costs would be cut since fewer babies would have to go into intensive care after birth. Who could be against such a program? Significant improvements in health and cost savings!

This is, unfortunately, where many people stop in their analysis of such a policy. It feels good, we'd be "helping" the most innocent people of all, and the costs are so minor; why, anyone who would be against this policy must be some sort of monster! But upon a deeper inspection, there are a host of problems with this policy. First of all, it is a huge presumption that we'd be able to correctly identify all the women using drugs. Some drugs, like cocaine, leave the system within a few days, so those users could find a way around the testing. Also, there is a high risk of false-positives in drug screening. That doesn't sound like too big of a problem, but the results aren't just between doctor and patient. Social services gets notified and the state as well, and on the basis of a false-positive, an expecting mother might have to fight to keep her other children from being taken away from her!

Second, even when we do identify the drug-using mothers, counseling isn't always going to be effective. Most women know that using drugs is harmful to the fetus, but the powerful pull of addiction makes it hard to quit. Those who don't have the willpower to quit on their own probably aren't going to quit anyway.

Third, and most important of all, is that if drug testing is made mandatory, most of the drug-using women aren't going to seek prenatal care in the first place. We would be driving these mothers away from the care that they and their child in particular need the most. Hence this well-intentioned policy meant to improve the health of these infants would actually have the opposite effect, denying them important prenatal care, and resulting in more health problems. This is the sad result of most interventist policies: they end up hurting the very ones the policy was intended to help.