MORE Debt Dross

Debt, Government

Before Republicans caved on the debt-ceiling, Tom Foreman of the state broadcaster CNN warned that interest rates may climb, if what he billed incorrectly as a default on the debt came to pass.

That would be a much-needed correction. Interest rates should more realistically reflect the risk of lending to the U.S. government—and borrowing in general. That has to happen eventually.

Foreman also worried that the 148 million Americans (!!!) who are currently partaking in government programs will suffer. Not if they bite the bullet and decide, instead, to partake in the economy, if only for minimum wages.

The profligate president fretted too that not enough people will risk buying Treasury bills from the U.S. government. That’s a good thing too.

Like white on rice, the U.S. is on any country with significant foreign currency reserves. We’re even borrowing from … Brazil, which is now the United States’s fourth-largest creditor. The countries who buy U.S. government bonds to finance our debt are enablers. Anything that discourages this dubious investment will encourage the U.S. government to live within its means.

Janet Yellen’s Monetary Mindset

Federal Reserve Bank, Political Economy

The president has appointed Janet Yellen to chair the Federal Reserve. Here is some information about her monetary mindset, by way of a post written on 03.14.10, when Yellen was made vice chair of the Fed:

In an economy of high unemployment and inflation, Barack Obama has gone and appointed as … chair of the Federal Reserve a woman called Janet Yellen, by whose “economic” model inflation is the result of “too many people working and too much economic prosperity.” Or at least, that’s how Larry Kudlow distills the theory.

That such an economic theory exists attests to the degree to which economics and politics have become intertwined. Certainly “Keynes’s political creed guaranteed a hand-in-glove relationship between the state and its stooge economists. Most of what Keynes advocated entails giving the state enormous confiscatory powers.”

Is “the Phillips-curve model,” Yellen’s preferred theory, an extension of Keynesianism, or is it just some form of free floating statism? I have no idea. But since most economists are servants of the state in-waiting, following the Phillips Curve—which posits “a consistent inverse relationship: when unemployment is high, wages increase slowly; when unemployment is low, wages rise rapidly”—has given rise to “a menu of policy options.” Examples, courtesy of the Concise Encyclopedia of Economics, are:

with an unemployment rate of 6 percent, the government might stimulate the economy to lower unemployment to 5 percent. Figure 1 indicates that the cost, in terms of higher inflation, would be a little more than half a percentage point. But if the government initially faced lower rates of unemployment, the costs would be considerably higher: a reduction in unemployment from 5 to 4 percent would imply more than twice as big an increase in the rate of inflation—about one and a quarter percentage points.

OF COURSE, the unquestioned premise of these phillipic prescriptions is that “stimulus” does indeed lower said unemployment rates. Only in The Oink Sectors.

“Super-confused Keynesianism” is Robert Wenzel’s apt description of Yellen’s theories.

Higher Rates And Hussein’s Healthcare Go Hand In Hand

Debt, Healthcare, Political Economy, Reason, The State

“You know what the insurance companies are like,” I was told by a statist neighbor, who adores Obama but concedes her healthcare premiums have gone up. How does the irrational individual solve the cognitive incongruity of rising prices and her undying love of the state?

She blames markets.

But even the stupid statist press can deny no longer that “insurance is at dramatically higher rates,” and some of the reasons are these:

First, the Affordable Care Act (ACA) sets minimum standards for benefits, including mental-health and substance-abuse treatment, maternity care, prescription drugs, and rehabilitative care, which were not included in many of the old plans. Also, insurance companies are now required to take all comers, regardless of their health status, and so rates are rising to cover their costs as well.

MORE.

Here The Heritage Foundation is forced into explaining the economically obvious:

…Contrary to a key intention of the legislation, the combination of mandates and taxes will not help to reduce the deficit. In fact, the PPACA will likely increase the deficit by an average $75 billion per year, and as a result, the nation’s publicly held debt will be $753 billion higher at the end of 2020. Such astronomical debt crowds out other productive investments and will lead to an estimated 670,000 lost job opportunities per year. …
he policy combination of spending and taxes alters the macroeconomic performance of the economy and feeds back onto the budget. A dynamic simulation shows that the higher initial costs are not an investment that pays off with a higher return in later years. Indeed, these front-loaded costs slow economic growth with higher inflation and higher interest rates, which overwhelm the benefits the proposal hoped to gain in later years.
The bill’s taxes, penalties, and fees on investors and businesses will decrease the amount of investment in the economy. This reduced investment will in turn lead to a decline in productivity, causing the economy to produce $706 billion less worth of goods and services. A smaller economic pie means that workers earn lower wages and salaries. Higher taxes on investment also put upward pressure on interest rates as investors seek to achieve their after-tax desired rate of return. …
…Lower wages reduce the amount of taxable income that could otherwise have been achieved. This will both increase the deficit and grow the total debt—which in turn puts upward pressure on interest rates and crowds out some savings that could have gone to new productive business investments.
Higher interest rates mean that more American tax dollars will go toward paying the interest on the federal debt rather than paying down the principal. Simulations using dynamic analysis estimate that the government would spend an average $23 billion more per year on interest rate payments over the 2010–2020 year window than it would without the PPACA.

MORE.

And from “Obama’s Politburo Of Proctologists”:

The pit of perverse incentives Papa Obama is engineering includes leveling the insurance industry, which by definition must discern and discriminate between applicants based on their health status (largely under individual control). Under his benevolent rule, private insurers will be subjected to a host of new regulations, “including a requirement to insure all applicants and a prohibition on pricing premiums on the basis of risk,” in the Cato Institute’s Michael Tanner’s rendering.
This means one thing: moral hazard. Writes libertarian economist Walter Block: “The greater the protection from the random expenses of sickness the greater the potential over-consumption of the item in question.”
We currently labor under “a seeming patchwork of indemnity insurance arrangements, managed care, private payment, and charity.” Yet the fewer the intermediaries interfering with the primary, patient-doctor relationship, the better the patient’s prognosis. The president’s prescription for too little freedom, however, is even less of the same!

MORE.

Only A Sicko Trusts The State With His Health

BAB's A List, Healthcare, Political Economy

By Myron Pauli

Around age 8, I got sick and either my mom or dad had Dr. Kontorwitz walk 300 feet with his black bag to look at me. I have no idea how the bill was paid and what was a PPO or HMO or HAS or Exchange or Cafeteria Plan – and someone else (my parents) had to figure it all out. At age 20, dad was dead and my mom moved away and I was without insurance (between college and grad school), when I last saw Kontorwitz for a 2nd degree burn on my foot – just me and the doctor – no accountants – and I paid the entire $5 in cash.

Starting with wage and price controls in World War II, employer-sponsored insurance became the norm. Insurance (for catastrophes) later turned into “health care” to cover Viagra, acne, diarrhea, and sprained ankles. In 1965, Medicare/Medicaid took regulation to new staggering heights. Every regulation begat more responses from providers, insurance companies, and middlemen involving further paperwork, accountants, attorneys and yet more middlemen.

Technological advances also allow us to keep terminally ill patients alive a few extra weeks or months. (I personally doubt that my wife’s last 3 weeks of suffering from cancer were worth the expense – but it was covered.) “Explanation of Benefits” statements require cryptographic skills – and this is long before the “Affordable Care Act” of 2009, alias “Obamacare”.

People old enough to remember any semblance of a “free unregulated market” in medicine are mostly Medicare recipients. To most people, to even get a Kleenex in a doctor’s office requires sheets of paperwork, dozens of signatures/waivers and insurance cards. This reality has existed for decades and is the only reality known to people who want to feel secure that their coronary bypass will only cost a $100 co-pay.

Since the solution to too much regulation is always more regulation, Obamacare was born. Some of its 2900 pages came from ideas from the Heritage Foundation, George Romney, various HMOs, trade associations and lobbyists. Naturally, the Republicans had their alternative solutions. I have a doctorate in nuclear physics and I doubt I can go through the thousands of pages and relevant legislation and bureaucratic “agency interpretations” in order fathom which bureaucratic mess is “better” – perhaps my kidneys are better off with the Democrats while my liver will fare better with the Republicans?! I suspect that 99.999% of people mouthing off have no clue. It is more like Sunni Islam vs. Shiite Islam – a matter of faith.

The libertarian alternative is to remove government from health care which is a situation completely alien to nearly all Americans. The $100 co-pay for the knee replacement is visible while the rest of the costs are unseen. While Americans can understand religious freedom to choose to worship Jesus vs. Zeus vs. Vishnu; health care freedom comes with responsibility and is an alien concept. And when “the taxpayers” pay for health care, we get the inevitable regulated Nanny State as surely as dropping an egg produces a splat.

But until Americans desire liberty as much as their life, Obamacare—or Boehnercare and PPOs, HMOs, HSAs, EOBs, exchanges, ad tedium—is here to stay. Democratic mommy vs. Republican daddy – we are all children and we had better obey our parents – especially when mommy and daddy are very power hungry and we children have been told that the alternative to regulated health care is sure death.

In spite of all the shutdown nonsense about closing down forests and parks, regulated medicine is only likely to end when the money spigot dries up.

LINKS:

1. http://www.ed2go.com/career/training-programs/medical-coding-billing-course

2. https://www.youtube.com/watch?v=sx2scvIFGjE

3. http://www.huffingtonpost.com/bob-cesca/get-your-goddamn-governme_b_252326.html
4. http://www.howto.gov/web-content/requirements-and-best-practices/laws-and-regulations/paperwork-reduction-act
5. http://rsc.scalise.house.gov/solutions/rsc-betterway.htm
6. http://www.econlib.org/library/Bastiat/basEss1.html
7. http://www.huffingtonpost.com/2013/06/12/soda-overweight_n_3429151.html
8. http://en.wikipedia.org/wiki/Dissolution_of_the_Soviet_Union

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Barely a Blog (BAB) contributor Myron Pauli, Ph.D., grew up in Sunnyside Queens, went off to college in Cleveland and then spent time in a mental institution in Cambridge MA (MIT) with Benjamin Netanyahu (did not know him), and others until he was released with the “hostages” and Jimmy Carter on January 20, 1981, having defended his dissertation in nuclear physics. Most of the time since, he has worked on infrared sensors, mainly at Naval Research Laboratory in Washington DC. He was NOT named after Ron Paul but is distantly related to physicist Wolftgang Pauli; unfortunately, only the “good looks” were handed down and not the brains. He writes assorted song lyrics and essays reflecting his cynicism and classical liberalism. Click on the “BAB’s A List” category to access the Pauli archive.