Tuesday, February 10, 2009

No Health Care for You!

We should have known that a bill that gets pushed through late on Friday nights and referred to with the word "emergency" is probably the kind that would need even more scrutiny than most. Fortunately, Betsy McCaughey with Bloomberg has brought to light some provisions that may be harmful to your health, noting that these are the handiwork of Tom Daschle, who, prior to being exposed for owing $140,000 in back taxes, was Obama's choice for Health and Human Services Secretary. Amidst the spending in the stimulus bill are provisions for health rules that will affect everyone in the United States. In it, McCaughey writes, the Office of the National Coordinator of Health Information Technology is given the power to "monitor [your] treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective."

McCaughey found that the provisions in the bill are nearly identical to those in Daschle's book, Critical: What We Can Do About the Health-Care Crisis. Daschle's book promotes setting up an appointed government agency to overrule the decisions you and your doctor make and "calls it the Federal Coordinating Council for Comparative Effectiveness Research (190-192). The goal, Daschle’s book explained, is to slow the development and use of new medications and technologies because they are driving up costs. He praises Europeans for being more willing to accept 'hopeless diagnoses' and 'forgo experimental treatments...'"

Wait a minute ... "slow the development and use of new medications?" Isn't that what the FDA already does with it's testing processes that take 8-10+ years and billions of dollars for new drugs to enter the market? And, while we're talking about a "stimulus" bill, isn't this exactly the opposite of what a stimulus is supposed to do?

And what are these "hopeless diagnoses" that Daschle speaks of? What about breast cancer that has spread and requires expensive treatments? What about AIDS for which there is no cure -- are "experimental treatments" that could save people's lives, or at minimum make their last days more bearable, now a thing of the past? What about cerebral palsy? Lou Gehrig's disease? Alzheimer's? What about rare diseases that doctors know little about?

Do we really want a bureaucrat sitting behind a desk examining our medical history and deciding how our physician is allowed to treat us? Is there any stranger to whom we would give control over our bodies and health? We would be reluctant to give that sort of carte blanche to anyone outside of our immediate families -- if that! Ironically, I doubt if the decisions by this appointed government agency will be made with as much expediency as the stimulus plan that establishes it. How long do you think your medical record is going to sit on someone's desk while you wait for a decision on whether you can get medical care or not?

During his term as Senator of Illinois, President Obama stated that he rejected the Born Alive Infant Protection Act of 2002 that would require a second physician to be present during abortion procedures to administer care if an infant were born alive, because, it was "designed simply to burden the original decision ..." If "burdening the decision" is a terrible thing, Mr. Obama, how can you reconcile this position with the creation of an entire government organization, costing more in your stimulus plan than the Army, Navy, Marines and Air Force combined, that is designed for the sole purpose of burdening the decisions between doctor and patient?

Monday, February 09, 2009

What Crisis?

Hearing words like "crisis" and "catastrophic" used to describe today's current pre-"stimulus" economic climate has me wondering: how bad is it really? Is the average American going through foreclosure? No. Are the millions of renters worried about house prices dropping? No. Am I personally suffering right now? No. Am I unable to get health care? No. As a matter of fact, I would bet that most of us are faring pretty well, even if our stocks aren't looking as good as they were a few months ago.

But, you say, what about the people who are losing their homes (by which, I assume you mean the few who actually are losing their primary residences, not the ones who are deliberately walking away from their second, third, fourth, fifth investment homes)? Foreclosure is not a new phenomenon. In normal markets, there are foreclosures. In fact, most of the delinquent loans reinstate under more favorable terms, usually by extending the loan term to reduce the monthly payment, or forgiving a portion of the principal. Banks have an incentive to restructure their clients' loans because banks do not want to lose their revenue and right now they certainly do not want to be in the real estate business. This was not the case during the housing bubble. From 2004 - 2006 in particular, banks were all too happy to enter the real estate business because they could turn around and sell the house for a profit.

But, what about people who have lost their jobs? At 7.2%, unemployment today is still low by historic standards. Unemployment right now also does not represent an across-the-board decline in jobs. Rather, it represents a transition from one sector to another. People who used to be in the mortgage and banking industries are moving to other sectors. This process takes time and there is some, temporary unemployment. People are not unemployed because there is no work for them to do; they are unemployed because in their previous role, they were not able to bring as much value as they cost.

What about people who have lost money in the stock market? This is a complicated issue, as stock prices reflect expectations of higher taxes to pay for national health care programs, bailouts, stimulus packages, higher corporate tax rates in general, increased capital gains taxes on stockholders, etc. All of these cause stock prices to go down. Is the solution then to raise government spending, thereby raising future taxes and inflation, which will cause stock prices to further plummet? When faced with higher capital gains taxes, people opt to either sell their stock now before the tax hikes go into effect, or they abstain from entering the market. Either way, demand drops and as we know from Economics 101, this means prices fall too.

More spending on socialized health care, government bailouts of companies that made bad decisions, and $800,000,000,000 quick-spend plans is not "the price we have to pay" to "get us out of a catastrophe." The expectation of increased spending and higher taxes under the new administration is what led to many of the declines in the stock market, caused companies to have difficulty increasing capital to retain employees, and is causing more economic woes than are warranted. Instead of proving these expectations to be correct, let's turn the course around by allowing consumers and businesses to tell the government to take a back seat and see how capable we are of deciding where our money goes without their so-called help.

Saturday, February 07, 2009

Inflation and Growth Are Not Synonymous

People often cite the monetary contraction that occurred around the beginning of the Great Depression as a reason to adopt Keynesian ideas that state spending and creating inflation by increasing the money supply are appropriate ways of increasing aggregate demand and spurring growth. In the five-year period from 1929 to 1933, the money supply dropped by one third. The effect is that each remaining dollar is more valuable in proportion to the amount that the money supply has declined. This causes the dollar to rise in value relative to other currencies, and is preferable when the country is an importer of foreign goods because, for fewer dollars, it is able to obtain more goods and services from overseas.

One would expect that imports in this time period would have risen dramatically; however, this was not the case. Instead, due to the high tariffs that were imposed at the same time -- most notably, the Smoot-Hawley tariff of 1930 which raised import taxes to unprecedented levels -- imports declined by 66% from 1929 to 1933, despite the contraction of the money supply which would have otherwise had the opposite effect on imports. In retaliation for the strict protectionist policies of the 1930s, other foreign trade partners imposed restrictions and raised tariffs on U.S. products, further crippling industries in the U.S.

The fact that a monetary contraction coupled with the most protectionist policies of the time were contributors to a depression should not lend credence to the idea that printing more money to spend is an effective method for increasing productivity. Assuming the same protectionist tariffs were in existence today and that the U.S. were an importer of many foreign goods, inflationary policies would magnify the decline in imports by decreasing the value of the dollar on the world markets and would spark more retaliatory policies from our trading partners and further economic declines.

Finance 101

Politicians are constantly prescribing new programs to cure all of our financial woes and make everyone richer, healthier, thinner, smarter, happier and nicer. Now, if politicians were producing things of value with their own labor and money, they would be helping the economy. Instead, they take your money and your employer's, friends', neighbors' and family's and future generations'. When that isn't enough to pay for their expensive tastes in government programs, they just print more and make all of your dollars worth less. As overly simplistic as this explanation sounds, these are their only two options.

Somehow, politicians seem to believe that Americans will buy into (no pun intended) the idea that increased government spending is the cure. Undoubtedly, these Americans are the same ones who believe that they can pay off their debt by getting a new credit card. We can see on an individual level that people maximize their long-term wealth by spending on necessary things and investing what they can so that they are able to consume more in the future. When we face tough times, we spend less and we spend intelligently. The federal government would do well to follow the same sound financial strategy.