Don Boudreaux takes the President down in an open letter:
CommentsDear Mr. Obama:
CBS radio news this morning ran a clip of one of your recent speeches. In it, you criticize insurance companies because they “ration coverage … according to who can pay and who can’t.”
My first thought was “not exactly; coverage is rationed according to who pays and who doesn’t.” Ability to pay isn’t the same thing as actually paying, and what insurers care about is the latter. Many folks – especially young adults – have the ability to pay but choose not to do so. They get no coverage.
But further pondering of your point leads me to look beyond such nit-picking to see fascinating possibilities. Not only insurers, but all producers who greedily refuse to supply persons who don’t pay should be set aright. Now I’m sure that you don’t ration the supply of the books you write according to any criteria as sordid as requiring people actually to pay for them. But our society is full of people less enlightened than you.
For example, the typical worker rations his labor services according to who pays and who doesn’t. That must stop. Oh, and supermarkets! Every single one rations groceries according to who pays. Likewise with restaurants, clothing stores, home-builders, furniture makers, even lawyers! You name it, rationing is done according to who pays. Indeed, my own county government has been corrupted by this greedy attitude: if I don’t pay my taxes, the sheriff takes my house – effectively booting me out of the county merely because I didn’t pay for its services.
Preposterous!
I look forward to your changing this selfish and unfair system of rationing that for too long now has kept Americans impoverished.
Sincerely,
Donald J. Boudreaux
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Health care can be expensive. There are lots of reasons why this is. Some of them we don’t want to change, such as the fact that modern health care is capable of miracles. Miracles aren’t cheap. Other causes we don’t want to change, such as the fact that third-party payers eliminate normal market pressure to keep prices down.
Obama has another idea, however. Control insurance prices!
President Obama will propose on Monday giving the federal government new power to block excessive rate increases by health insurance companies, as he rolls out comprehensive legislation to revamp the nation’s health care system, White House officials said Sunday.
Two reasons this is dumb:
1) Price controls don’t work. It’s like trying to legislate away gravity. Michael Tanner explains some of the consequences:
Insurers unable to charge more for an increasingly expensive product can be expected to trim costs in one of two ways:
- They can drop their most expensive customers — in this case, the sickest, who consume the most health care. Many companies are already doing this, a major source of dissatisfaction with the health-care system. In fact, the president wants to prohibit companies from doing this.
- They can cut back on their reimbursement rates to hospitals and physicians. But neither doctors nor hospitals, any more than insurance companies, are willing to operate at a loss. If payments fall below their costs, they’ll simply stop taking patients. One only has to look at government programs like Medicare and Medicaid to see how this works.
2) Insurance prices go up because health care prices go up. Not only is Obama attempting to apply the wrong remedy, but he’s targeting the wrong problem. It’s stupidity squared.
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President Obama likes to assert that economists across the political spectrum agree that big government spending is necessary to fight off recession. “Economists on the left and right,” he insisted early in 2009, “agree that the last thing the government should do during a recession is cut back on spending.” Essentially, he’s saying that all economists are Keynesians. This is simply false, as Harvard Professor Jeffrey Miron tells us today at the Daily Caller.
..That brings us to the second argument for higher spending: the Keynesian claim that spending stimulates the economy. If this is accurate, it might seem the U.S. should continue its high-spending ways until the recession is over.
But the Keynesian argument for spending is also problematic. To begin with, the Keynesian view implies that any spending—whether for vital infrastructure or bridges to nowhere—is equally good at stimulating the economy. This might be true in the short term (emphasis on might), but it cannot be true over the long haul, and many “temporary” programs last for decades. So stimulus spending should be for good projects, not “digging ditches,” yet the number of good projects is small given how much is already being spent.
More broadly, the Keynesian model of the economy relies on strong assumptions, so we should not embrace it without empirical confirmation. In fact, economists find weak or contradictory evidence that higher government spending spurs the economy.
Substantial research, however, does find that tax cuts stimulate the economy and that fiscal adjustments—attempts to reduce deficits by raising taxes or lowering expenditure—work better when they focus on tax cuts. This does not fit the Keynesian view, but it makes perfect sense given that high taxes and ill-justified spending make the economy less productive…
Recently, Obama again cited the entire spectrum of economists as supporters of his agenda: “Now, if you hear some of the critics, they’ll say, well, the Recovery Act, I don’t know if that’s really worked, because we still have high unemployment. But what they fail to understand is that every economist, from the left and the right, has said, because of the Recovery Act, what we’ve started to see is at least a couple of million jobs that have either been created or would have been lost.”
Economist Robert Barro explains in the Wall Street Journal what a load that is.
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Moonbattery points out that the usual suspects are taking advantage of the attention generated by the Winter Olympics to do their typical song and dance.
Calling themselves the “Anti Poverty Committee,” moonbats dressed in black “assaulted police officers, spray-painted cars and buses, smashed windows, and terrorized passers-by.”
They seem quite confused. How is it they think that destroying wealth will help fight poverty?
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In a rap video…really:
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This is a couple months old, but it’s remarkable enough to be worth the belated mention. In a letter to the President promoting “green technology,” six liberal Senators brag about how inefficient their pet project of solar technology is. No lie.
They say that solar power “creates more jobs per megawatt of energy produced than any other form of energy.” And they consider that a good thing!
Apparently this needs reiterating. Creating jobs is not the goal of economic activity, it’s a byproduct, albeit an important one. If jobs were all that mattered, we could pay people to dig holes and fill them up again, or outlaw all machines that enhance productivity at the expense of a particular job once done by human labor. Of course, the result would be less overall productivity and a lower standard of living for all.
Hat-tip: Planet Gore on NRO
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We need to “pitch in” more:
House Speaker Nancy Pelosi (D-Calif.) endorsed the idea of a “global” tax on stock trades and other financial transactions, saying the estimated $150 billion in annual revenue from such a tax could be used to help fund more stimulus spending.
At her weekly press briefing on Thursday, Pelosi said the financial transactions tax (HR4191) currently before Congress would have to be made “global” to keep U.S. investors from taking their business overseas and out of taxable reach.
…Pelosi said she thought the idea might have currency among a public eager to see Wall Street firms “pitching in” to help the government grow the economy.
“I think there would be a market for it among the American people to say that we are all participating in the economic prosperity of our country, and we are all pitching in to continue that prosperity,” said Pelosi.
Nancy Pelosi’s view of society and the economy is gloriously and unabashedly foolish.
Let me get this straight: we need to tax productive financial transactions and give that money to a cadre of bureaucrats and politicos, who will then waste it various and sundry ways, in order to be prosperous. No.
Taxes are not how we contribute to prosperity. We contribute to prosperity by producing, and taxes are a burden on production. Nancy Pelosi has it exactly backwards.
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This won’t be the first time the subject has been discussed on this blog, but the determination of many to paint last year’s financial implosion as a failure of capitalism requires diligence and constant restatement of the truth. The truth is exactly what Steven Horwitz and Peter Boettke bring in their new report, “The House that Uncle Same Built: The Untold Story of the Great Recession of 2008,” published by the Foundation for Economic Education.
From the introduction:
The theme of “The House that Uncle Sam Built: The Untold Story of the Great Recession of 2008” is that government policy, not a failure of free markets, caused the economic trauma we have been experiencing. We do not live in a free market. We live in a mixed economy. The mixture varies by industry. Technology is primarily free. Financial Services is primarily government. It is not surprising that the most government regulated and controlled segment of the economy, financial services, experienced the biggest problems. These problems were created by actions by the Federal Reserve combined with government housing policy (especially the government-sponsored enterprises – Freddie Mac and Fannie Mae). Misguided government interference in the market is the real culprit in laying the foundation for the Great Recession.
The entire essay is available as a pdf here.
Hat-tip: The Locker Room
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The jobless rate is currently at 10% (or higher if you count the discouraged), so clearly we need a little government job promotion, right? Barack Obama thinks so, and is set to unveil his latest “plan.” But not so fast! Haven’t we done this before?
This will be the third time government has acted to “create jobs” since the beginning of 2008. Why should we believe it will be any more successful now than it has been in the past?
In early 2008, President Bush teamed up with Nancy Pelosi to pass a $150 billion (then considered a lot of money) stimulus package. This “booster shot” to the economy, consisting primarily of rebates to individual taxpayers, was supposed to head off recession. At the time, the unemployment rate was under 5%.
A year later, Pelosi found herself with a new dancing partner in Barack Obama. President Obama’s subsequent stimulus package dwarfed that of President Bush. Passed when the unemployment rate was not yet 8%, it was promised that the $800 billion stimulus would hold joblessness below a peak of 9%. This package also failed, and today the unemployment rate is in double digits.
Leave it to government to insist we continue down a path with such a sterling record of failure. It is time to abandon the Krugman-championed policies of Keynesian economics. Government cannot create jobs by taking money out of the economy, funneling it through a wasteful bureaucracy, then directing it to the most politically connected and favored industries. No economy has ever been successfully powered by such a model.
The best thing Democrats can do is to stop threatening to destroy so many industries via regulation and government control. This would reduce the uncertainty hampering investment. If they combined that by lowering the rates of the most destructive taxes, such as the corporate and capital gains taxes, an improved job market would follow. Otherwise, we can continue banging our collective heads against the wall while insanely expecting an outcome other than pain.
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Howard Dean was a major contender for the Democratic nomination for President of the United States in 2004, and later served as Chairman of the DNC. In other words, he is a mainstream Democrat. It is thus significant when he says a bit of capitalism mixed with a dab of socialism is the way to go.
This level of ignorance is frightening. The “third way” between capitalism and socialism is exactly what created the financial crisis. It is also delivering Europe into an abyss of dependence and moonbattery. As Hayek warned, half measures of socialism will lead inevitably to the full thing.
We know what works. It’s called free enterprise, and it’s based on simple principles, such as individual rights and personal responsibility. We abandoned this approach over 70 years ago and are suffering the consequences today. It’s time to bring it back.
Hat-tip: A Chequer Board of Nights & Days
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I am a libertarian-conservative blogger living in the DC area. I have a Master's degree in Political Science, but please don't hold that against me.
