I
like to write about how government intervention distorts the economy.
I call it a passion. And the last several weeks of financial news
have given me plenty of interesting fodder. It's full of crony
capitalism, law suits, one Harvard economics study and a tenured
professor who calls this country's political discourse the “worst
nightmare” for our economy.
Dot #1
Crony
Capitalism
The
first piece of news is a very well written editorial from Senator
Rand Paul about the EpiPen pricing scandal. In Time Magazine online,
Senator Paul rebukes the EpiPen price increase as a result of the
FDA's monopoly against new entrants into the marketplace, and the
mountain of red tape that all drug manufacturers face with every
innovation. Citing paperwork, patent exclusivity and FDA grants, and
a understaffed (and often very scared) FDA, he draws out just one
option. His solution? “We
can reform the system, lower costs and increase competition by
getting bureaucracy out of our innovators’ way.”
Read
the whole article here.
Coming
from a Libertarian, his solution is expected. He points out that the
The Affordable Care Act (a.k.a., Obamacare) was supposed to prevent
this kind of gouging. But it, and many other government groups, have
actually done the opposite. A small handful of well-connected
producers are being protected at the expense of many. And the
monopoly being held by those few in that industry is costing everyone far
more than is necessary for such life-saving medicines. If the company
making EpiPen were acting within the marketplace normally, they
wouldn't be spared from the lower prices that would inevitably be
offered from competitors who are willing (and maybe even happy) to
accept lower profits.
He
has rightfully concluded that more government isn't the medicine we
need. It's the government that ails us.
Dot #2
The
Real Price of Socialized Medicine
In
the second, but clearly connected, piece of news, Jed Graham, writing
for Investor's Business Daily, talks us through the last policy and
legal nightmare that has become Obamacare, and specifically its “risk
corridor receivables” program. It's the “corridor” in which if
a company suffers losses, the government will make up those losses –
it's essentially government-assured backing. Should the companies
involved lose, the government will pool all insurance monies together
to make sure no losses are allowed. But, conversely, if “excess
profits” of 3% or more are gained, all of the companies involved
will become profit sharers. This sounds like a pretty good deal.
Right? It's not.
In
his article, Jed Graham points out that there are lawsuits afoot. In
fact, many lawsuits. Several companies, including United
Health,
Anthem
and Aetna are now treating what possible “risk corridor
receivables” are owed to them to be “a lost cause,” while
insurers Humana, and HealthNet/Centene are reporting losses of
hundreds of millions of dollars each. All of them are trying to
recoup their monies by way of picking apart the government through a
class action lawsuit – if the government decides to allow such
action.
And
what should have been the biggest recipients of Obamacare funds have
turned out to be the biggest losers. Blue Cross/Blue Shield are deep
in the red, while participating nonprofit health cooperatives are
being driven out of business entirely. What's more, Graham points
out: “HHS
confirmed in the memo that any money collected under the risk
corridor program for 2015 will be used to shrink its massive $2.5
billion shortfall in 2014, and no funds will be available at this
time for 2015 benefit year risk corridors payments.” In other
words, they're going to pay off their pending debts first (from 2014),
then the private insurers might
receive
something (for 2015). But, given the very disappointing, short history of
Obamacare, (it's only two years old) and the numerous pending
lawsuits, most likely not.
If
these economic insults and injuries weren't enough to satisfy you,
there's more. The DOJ is: “...open to discussing resolution of
those claims,” which is a euphemism for: go ahead and sue us, we
don't mind. Why don't they mind? Because they're getting their money
from you. They
aren't going to pay anything; you
are. If they win, you pay into their system. If they lose, you pay
for the failure of their system. That's
the real price of socialized medicine. You
pay. Always you.
But
does that kind of news surprise anyone who knows even the most
cursory information about the costs of Obamacare? To date, there are
12.7 million people enrolled in the A.C.A. plan, which cost 9 hundred
billion dollars to implement. That means the implementation of the
program, which was supposed to save Americans money, is now costing
$70,866.00 per person covered from the very beginning.
I
think I know what you're thinking: Yes, but that's the estimate for
the first ten years. Okay, you're right. That was the initial
estimate for the first ten years. Today, that estimate is a
little different.
Photo
above from The Weekly Standard.
Obviously, the costs have gone up. Actually, they've nearly tripled.
Obviously, the costs have gone up. Actually, they've nearly tripled.
Our
government purveys this feel-good economic chicanery on us all the
time. It grossly underestimates the costs of programs to drum up
public support, but then tells us the very real, painful truth, one
subtle layer at a time much, much later. And all the while, the
“architects” of such programs laugh at us for having believed in their nonsense in the first place.
But
there's more. Let me bullet point a few of them to save you some
time.
- The
Obama administration originally wanted to cover at least 52 million
people in the A.C.A. program. That number is now only 12.7 million.
- The
administrative costs, losses and subsequent lawsuits are still
climbing. And all of those costs are already being placed onto the
backs of the American taxpayer.
- Out-of-pocket
deductible costs to the recipients are much higher than originally
estimated.
- Premiums
are rising.
- Taxes,
fees, and onerous regulations are spiraling into the system.
- There
are more older and sicker people going into the system than
originally estimated.
- Younger
people are avoiding the system altogether, while not paying any
penalties.
- Subsidies,
money transfers, cost estimates and enrollee estimates have all been obfuscated by several offices and the accounting techniques they use.
- The
program officially took effect in 2014, and two years in, it has
already become a major liability to the American people and their
very fragile economy.
- Should
any more than 12.7 million people sign up for the program, the now
2.6 trillion dollar estimate will also go up. (If I include the
original 52 million desired people estimate, at the present rate,
then the cost of Obamacare for the original 52 million people, in a
country of over 300 million people, will cost about 10.64
trillion dollars. That's an amazing sum, because the entire U.S.
economy amounts to about 14 trillion dollars. So we need to ask: is
there any country in the world that would be willing to sacrifice
over 75% of its entire economy to “give” health insurance to
less than 20% of its population?)
- Some
clinics and hospitals are opting out of accepting insurance entirely,
because of the complexity of dealing with that industry.
- Seven
states have already tried government reformation of the health care
industry in their respective states. All of them have failed.
We
can be sure there's more.
There's
always more to explore regarding what the government is doing to the
American people. Especially when it's something as big as the health
care system. I imagine only the tax system would be bigger. But from
the information above, we can see that some of the most orchestrated,
deceptive and constraining efforts placed onto the laps and into the
wallets of the American people recently is socialized medicine –
a.k.a. Obamacare.
Dot #3
Cause
And Effect
In
the last connected news story, Harvard Professor Michael Porter
schools us in “...the
reality of what is causing our problems and what to do about them.”
He's an economist, so he's talking publicly about the economy –
always the economy.
But
he admits that when he and a group of colleagues put together their
“Harvard Business School Study of Competitiveness”: “...the
last thing I thought I would end up doing when I got into this
project was to actually start deeply studying the political system.”
But that's exactly what they did.
Most
economists stick to what they already know – the graphs, the
charts, the droll, boring data that gives most people the heebie jeebies. But not him. And not me. Their study found that what's
really making the American economy sick isn't really the economy, but
rather the politics behind the economy. In their study, titled:
“PROBLEMS UNSOLVED AND A NATION DIVIDED,” the group outlines what
they believe to be the real issues that the American public needs to
address to get the economy back on its feet. Again, to save you some
time, here are the bullet points.
- THE
U.S. ECONOMY IN AN ERA OF POLITICAL PARALYSIS
- FALTERING
U.S. ECONOMIC PERFORMANCE
- AN
ERODING U.S. BUSINESS ENVIRONMENT
- THE
PRESSING NEED FOR A NATIONAL ECONOMIC STRATEGY
- AN
ECONOMIC STRATEGY FOR WASHINGTON
- ACHIEVING
TAX REFORM
- A
FAILING POLITICAL SYSTEM
When
an entire group of Harvard-educated economists get together to
discuss so much of the information that most people find not the
least little bit noteworthy suddenly start to talk politics, as a
matter of economic necessity, you can be assured that the underlying
problems being talked about are seriously pressing issues for
everyone. We should all read this study. It highlights what's wrong,
and the path forward to put the American economy back on track from
stagnation to becoming a growing
competitor on the world stage.
It's
about the economy, stupid. Always.
Okay,
maybe not always the economy. Sometimes, even the most
well-intentioned economists can stray from their charts and graphs
(Paul Krugman, anyone?). But in this case, and I'm taking into
account the two stories above, I think the Harvard Business School
review is spot-on. Our current political climate is costing the
American people far more than any of us realized.
And
the American media is having a great deal of trouble seeing all of
that forest through the trees. They're all focusing in on the
economy, but the real culprit is our political system, and our
political discourse. If we want to restart the economy, and grow,
prosper and reinstate the mentality that our children are destined to
have a life that's better than our own, then all of us will need to
stop confusing cause and effect.
Our
economy is sick. Very sick. But it's our political system that's the
cause. Not the cure. No one in their right mind can think that the
remedy for what ails us will come from the same people and system
that are causing our illness.
Thanks
for reading.
Mark
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