Bastiat vs Marx
The Need for Reform: ObamaCare is not Health Insurance
The basic premise that everyone should be protected in case of serious illness or injury with appropriate insurance is not an unsavory idea. But the concept of an individual mandate does nothing. Not only does it not help with that problem of encouraging everyone to carry coverage, it confuses the entire idea of what “health insurance” is or is supposed to be — so much that it affirmatively discourages or reduces the likelihood that people will have insurance. I propose that the concept of health insurance should only really be related to major medical situations, like other true “insurances”.
The individual mandate is both unconstitutional and ineffective because it leads to a poor allocation of resources. In order to understand why, it requires an understanding between the difference of real health “insurance” and what currently counts as health insurance (a broad medical coverage plan).
Insurance, by definition, is a payment of a premium to cover the very unlikely event that would result in high economic consequences. Therefore, it has the effect of relatively low premiums to protect against that economic possibility.
In contrast, what counts as medical insurance in this country is a small portion of real insurance, but is largely pre-paid medical care: you pay your monthly premium which you get back every time you go to the doctor because you’ve already contributed x so many dollars a month which covers the doctors’ fees (minus a “co-pay” or “deductible”). It’s not an efficient practice, however, nor a cost-effective one. It gives the false impression that going to the doctor is cheap, when in reality, you’ve already paid in advance for doctor visits – that you may or may not have.
This is in contrast to other types of true insurance. I submit it is necessary to remodel the health insurance system after other insurance sectors – such as life, fire, or home insurance. For instance, it is both accepted and reasonable that you will pay more for life insurance at the age of sixty than at twenty-five. The reason for this practice is the understanding that the risk is higher.
Likewise, people buy fire insurance because the economic loss is from a fire is extraordinarily great and the cost for coverage is relatively low. But even with fire insurance, you pay more if you home is made of wood and not brick, and if you live farther from a fire station than closer — that is the matter of risk.
Everyone should have routine doctor visits. If everyone paid for those out-of-pocket, it would be more economically viable, because one would only be paying for what he needed – and would probably result in more healthy citizens who have an economic incentive to take better care of themselves. Instead, the government intentionally combines and obfuscates the meaning and definition of insurance to include medical coverage or routine costs. The only people who truly need that are the same people who can’t afford anything — and should be treated like those who can’t afford routine food.
You don’t need insurance to go to a doctor. That is welfare. For the average person who pays 15-20K a year of medical coverage, a very large percentage of the cost is not insurance – it’s the prepaid care for a larger pool of people. Therefore, individuals are really overpaying when it is set up this way because the real insurance part is intentionally combined with health care so you can hide the cost of those with higher risks, i.e the cost is buried within premiums.
The term “individual mandate” is intentionally confusing. The individual mandate — as the administration would describe it — is a requirement that everyone buy their own health insurance. The basic concept of everyone having their own health insurance is not, in and of itself, terrible — if health insurance were actually insurance in the same way life or fire insurance are. Obama Care, however, is not and therefore the individual mandate is not a mandate to buy health insurance as we’ve been told — it’s a mandate for universal and pre-paid medical care.
Since people of different ages, medical conditions, pre-existing situations, etc have different anticipated costs, the purpose of an individual mandate has nothing to do with getting people to buy their own insurance. It is the forcing of individuals to buy into a system that makes people pay for medical treatments that are not theirs, support welfare, and overpay for services in order to create a coverage that is similar for all person. That is legal plunder and anti free-market. The health care industry would best serve our citizens if Obama Care and the individual mandate was rescinded and if it restructured health insurance as a ‘true insurance’.
House Votes to Repeal Medical Excise Tax
FLASHBACK: Don’t forget that the House voted to repeal the Medical Device Tax on June 7, 2012 with “H.R. 436, the Protect Medical Innovation Act of 2012”. The Senate never did — not then, not now. Who’s looking out for businesses? See my post from June 2012:
This little-talked about tax seems to be absent from news coverage. Are media outlets are avoiding discussion of Obamacare items in advance of the Supreme Court ruling expected later this month? In case you missed it, on June 7th, the House voted 270-146 to repeal the medical excise tax. The bill must now pass the Senate, where current speculation is that it will not pass.
What is the medical excise tax? Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax. It exempts items retailing for <$100. [Bill: PPACA; Page: 1,980-1,986] Many are ardently opposed to the new tax, and rightfully so. As an excise tax, it taxes gross sales – even if the device company doesn't turn a profit that year. Note: this tax is one of many slated to go into effect January 2013. As a revenue raiser, its impact is nominal. The government speculates it could raise $20-$30 billion. Though that sounds like a lot to you and me, it's a drop in the bucket in terms of government revenue. Furthermore, from an business perspective for the companies subject to this tax, the extra resources needed to comply will be burdensome for companies. Price changes and paperwork will take time and manpower away from the company's main purpose -- to produce a product -- in order to handle this new regulation. From a common sense perspective, why would the federal government want to make medical devices -- which save lives -- more expensive? Will the Senate support small businesses and repeal an unnecessary, expensive, and burdonsome tax? The House has done so. The Senate should follow suit.
American Wealth Declines ~ 40%
From an article in the Washington Post:
The net worth of the American family has fallen to its lowest level in two decades, according to government data released Monday, driven by a more than 40 percent drop in their stakes in their homes.
The Federal Reserve’s detailed survey of consumer finances showed families’ median wealth plunged from $126,400 in 2007 to $77,300 in 2010 — a 39 percent decline. That put them on par with median wealth in 1992.
The Fed’s data underscore the depth of the wounds of the Great Recession and how far many families remain from healing. The median value of Americans’ debt did not change between 2007 and 2010. Meanwhile, the housing market crash inflicted particularly severe damage, with the Fed showing that the median value of Americans’ equity in their homes plunged 42.3 percent between 2007 and 2010.
The survey is conducted every three years, and this report offers one of the most exhaustive looks to date at the greatest economic upheaval in a generation. Although there have been some signs that the recovery has picked up steam — housing prices have begun to stabilize and unemployment has fallen — Fed economists said those improvements largely do not change the survey results.
“Recovery from the so-called Great Recession has also been particularly slow,” the Fed said in its report.
And yet, spending has increased at a greater rate than has even been seen in the history of this country. Spending, on the backs of the taxpayer. No wonder we are poorer. We are shouldering a staggering amount of federal debt.
Solutions and Failures for Public Debt
Over at Hot Air, a fantastic piece came out today regarding the different solutions governments are seeking to deal with looming and deepening debt crises. The author, Karl, contrasts the examples of Wisconsin and Connecticut — deep cuts and reform vs a balanced approach, respectively. The difference in the results of each type of debt solution are striking. The author then draws on other instances of failure resulting from a “balanced” approach (tax hikes and spending reduction)to show this type of solution is untenable in our current economic climate.
The article is a must-read in its entirety. The last paragraph sums it up nicely.
The common thread is the establishment’s ideologically extreme insistence on center-left compromises. Center-left government is at the heart of most of the crises America currently faces; it is at the heart of the budgetary crises here and in Europe. People like Brownstein see them as a virtue, despite their track record of failure.
World Money Supply Decreases
UK Telegraph this morning,
The latest data show that the real M1 money supply – cash and overnight deposits – for China, the eurozone, Britain and the US has been contracting since the early Spring. Any further falls risk a full-blown global recession.
Clear signs of trouble are emerging in the US, until now the last bastion of strength. The New York Institute of Supply Management said its ISM business index – a proxy for business demand – flashed a “screeching halt” in May, crashing to 49.9 from 61.2 in April, where anything below 50 denotes contraction. Unemployment is rising again after grim jobs data for April and May, indicating that the economy may have fallen below stall speed.
This report matches up with my earlier article which outlined the 1-yr % change in the global markets. So, what’s the solution? Print more money? QE 3? The article has some recommendations. What’s yours?
Dow Loses All 2012 Gains — But Wait, There’s More
From the WSJ:
U.S. stocks posted their biggest losses of the year following another disappointing employment report.
The Dow industrials sank 274.88 points, or 2.2%, to 12118.57, turning negative for the year. The Nasdaq composite lost 79.86, or 2.8%, to 2747.48. The S&P 500 fell 32.29, or 2.5%, to 1278.04.
Gold prices shot up 3.7% to $1,620.50 a troy ounce. The yield on the 10-year Treasury note fell to 1.467%, its first time ever below 1.5%. Crude-oil slumped 3.8%. The dollar retreated against the euro and yen.
However, want some really sobering numbers?
Go down to International Stock Markets and start looking at their 1-yr % change.
Spain? 41.34% of their stock value GONE.
Italy? 36.84% of their stock value GONE.
France? 25.58% of their stock value GONE.
Britain? 11.27% of their stock value GONE.
Canada? 16.02% of their stock value GONE.
Argentina? 28.95% of their stock value GONE. (remember them? Right now they are denying devaluation speculation)
Hong Kong? 21.45% of their stock value GONE.
China? 13.49% of their stock value GONE.
Japan? 13.16% of their stock value GONE.
Israel? 15.03 of their stock value GONE.
Egypt? 15.15% of their stock value GONE. (didn’t they just have a revolution? On par with Israel…)
The U.S. Dow Jones? Down a mere 3.14%
I don’t think we’ve seen numbers such as these since the Great Depression or the fall of Rome. Worse, this is all being done on speculation on the Greek market’s impact on the Euro.
Two things:
(1) The world markets are tanking and that “full faith and credit of the United States” on your money is what’s keeping America afloat.
(2) You should be investing in precious metals if we don’t get a budget out of Congress by the end of the year. Not gold and silver, either… but copper and lead.
Between the federal statutory debt limit and the November Presidential elections, Autumn 2012 is certain to be just as volatile.
With Unemployment Up, White House Points to Bush
I kind of feel bad for the guy who writes the White House blog. He must be very, very tired. So tired that he has to recycle old themes repeatedly (it’s Bush’s fault) and make sure no blame is placed on the shoulders of his boss, Obama.
With a dismal jobs report for May and unemployment up from April, the White House immediately points back 5 years.
There is much more work that remains to be done to repair the damage caused by the financial crisis and deep recession that began at the end of 2007.
Then, he talks about Obama’s plans for recovery.
In the American Jobs Act and in the State of the Union Address, the President put forward a number of proposals to create jobs and strengthen the economy, including proposals that would put teachers back in the classroom and cops on the beat, and put our nation’s construction workers back on the job rebuilding our nation’s infrastructure. The President has also proposed a “To-Do List” of actions that Congress should take to create jobs and help restore middle-class security. This includes eliminating tax incentives to ship jobs overseas, cutting red tape so responsible homeowners can refinance, giving small businesses that increase employment or wages a 10 percent income tax credit, investing in affordable clean energy, and helping returning veterans find work.
Too bad he doesn’t mention the fact that none of Obama’s proposals have garnered a single “yea” vote in the House or Senate in either party over the last two years.
And how’s the budget working out? Paul Ryan got it right when he pointed out the bicameral and bipartisan rejection of Obama’s ideas.
I think the best part of the blog post, however, was the summary:
As the Administration stresses every month, the monthly employment and unemployment figures can be volatile, and employment estimates can be subject to substantial revision. Therefore, it is important not to read too much into any one monthly report and it is helpful to consider each report in the context of other data that are becoming available.
At least they got that right…
The report comes a month after the government reported that just 115,000 new jobs were added in April, a number that helped contribute to a general malaise about economic growth.
Even that number was worse than thought: The BLS revised the April number down to 77,000.
The White House report was written by Alan B. Krueger, the Chairman of the Council of Economic Advisers
UPDATE: Jay Cost, over at the Weekly Standard, chimes in on the White House response: Not Good Enough