Of Bludgeons and Innovation

Yesterday, I got an email from the White House's propaganda wing, signed by O.  In it, he trumpets the fact that insurance companies "... will be required to spend at least 80 percent of the health insurance premiums you pay on your health care, instead of overhead costs like advertising and executive compensation."

The dolt, and the other dolts up there, seem to believe that these two things are unnecessary to the proper conduct of business.  He stopped short of saying that reform is meant to eliminate profits at insurance companies, but truly, that is the intent.  Since forever, insurance companies spent about 65% of revenues on payouts, using the other 35% for operating the business, so O has more or less appropriated 15% of the insurance companies' revenue.  (Hmmmm....is that an illegal taking?  Probably not, but it is, in effect.)

O's version of health care reform, if it goes fully into effect, will ultimately destroy our health care industry.  We will be left with a system of primary care with little capacity to meet higher level needs and will be bereft of innovation.  It will eventually be used to bludgeon us into compliance, just as TSA is being used right now.  The level of innovation will be governed by that engine of innovation that is our federal government.  You know, the organization that gave us the Post Office, the IRS, the government procurement process, the TSA and the EPA, among others.

Will You Listen Now, Cap'n Oblivious?

Back in September, I posted about Paul Otellini, CEO of Intel and his comments about investing in the US.  He ain't.

Well, OK, he is.  But most of their investment in new plants is happening overseas.  Note that the Vietnamese plant is expected to:  "...expected to create thousands of skilled jobs as the nation moves from low to hi-tech."


Vietnam is becoming hi-tech.  Viet-f'n-nam is becoming hi-tech.  


If O (and the rest of our governmental leaders) doesn't get it through his shellacked head that we compete globally for jobs, we are doomed.  Because our business leaders have figured it out.

Why Government Shouldn’t Try to Pick Winners

Whenever the government meddles about in any given market, trying to designate its preferred winner or outcome, it invariably fails.  Right now, the Exalted One is involved in doing just this on a number of fronts; the auto industry, the energy industry, the medical industry, the financial industry and so on.  In the auto industry, The One gives us the Chevy Volt:

Not a bad looking car.  But you can get a non-hybrid counterpart from Chevy for about $25,000 less.  Chevy had more or less mothballed the Volt until the government bought 61% of them and ordered the Volt to be brought to market.  Obama, you see, knows what we want better than we know what we want.  Prediction:  neither the Volt nor its lower-cost counterpart (the Cruze?).  See, that’s how I know it won’t sell.  I can’t even remember the name of the car.  But, because O wants to see “green” stuff (let alone the fact that there isn’t anything significantly more green about the Volt), the Volt gets built.  It’s suits his political purposes.  Sometime in November, O is going to force GM to go public and it has little to do with whether or not it makes good business sense.  It will happen because it suits O’s political purposes.

For decades, government has mucked about in the housing industry.  Mortgage interest deductions, Fannie and Freddie doing their thing with the sub-prime stuff, flood insurance and so on.  Here is proof that all this centralized planning (and that is what it is) has failed.  18 months and billions of dollars and the Moron in Chief still thinks that throwing another $50 billion or so at the economy will somehow magically cure it.  Here is an open letter to the President by Dr. Jeffrey Harding, an economics blogger that tells him exactly what the problems are and how to address them.  The blogger is right on every point.  (BTW, any time you read an econ blog you must read the accompanying comments.  They are frequently better and more informative than the original post.)  From ZeroHedge:

“Here are some guiding principles for "what works":

1. Economies can repair themselves without a lot of government help. History has proven this time and again.
2. Government interference in the repair process can hinder recovery or even make things worse.
3. Government spending is very inefficient.
4. Individuals can make better choices about what to do with their money than the government.
5. Economic growth only comes from private enterprise. The corollary of this is that government can only spend money, not make money.
6. Since government produces nothing, then real growth and real jobs can only come from private enterprise.
7. If government spending is inefficient and if economic growth comes only from the private sector, then taking vast amounts of money out of private hands and putting it into government hands will hinder growth.
8. Government spending to revive an economy has failed wherever and whenever it has been tried.
9. More legislation increases uncertainty for businesses, making them reluctant to expand (called "regime uncertainty" in economic terms).”

As noted in the comments, this viewpoint and the accompanying advice will be ignored.  It doesn’t fit with O’s worldview.

This just in and related to this post.  Austan Goolsbee is on the Prez’s Council of Economic Advisers and may be up next to replace the horribly inept Christina Romer.  This admittedly wonky piece basically sums up what I have been trying to say here.  So-called “targeted” spending or incentives don’t work, and Goolsbee based his doctoral thesis on this finding.  Now, he has to dance around his own work.  Should be fun.

Finally, here is what happens when a politician goes off the deep end when it comes to spending money based on his own preferences.  Learn about Russia’s Chess City, built in 1998 on the whim of a politician.  Why, he likes chess so everybody must like chess just as much! 

Chess City is crumbling, by the way, and largely uninhabited.  So, what color Volt are you gonna buy?

Country Poised to Prosper in 2010

 

Tax cuts, particularly for businesses, rolling out this year are expected to give dramatic boost to the economy.

Great news, if you live in Germany.

I love to see real world examples of economic theory.  We’ve all been part of a huge demonstration of the forces of supply and demand since Hurricane Katrina as the price of oil and gas has gyrated up and down the spectrum.  People bitch and moan about the price for a gallon of gas and I, being the weirdo I am, study them and try to suss out their decision process.

If you will recall, right after Katrina, the gas pipelines that supplied us here in North Carolina were shut down.  Immediately, the price went from about $1.80 or so to as much as $5 in some places.  I had filled up the day before because I had to drive to Burlington in the morning, about 90 minutes away.  Gas that morning as I left town was still about $1.80.  When I rolled into Burlington, prices were up around $4.50.  I switched to a news channel on the radio and heard what was going on and immediately pulled in to the nearest gas station to top off.  (Of course, they were telling everyone not to do that, but I drove for a living then and some places were already out of gas, so I couldn’t risk not having gas.)  The gas station was no busier than it ever was and that was what was so interesting to me.  People either didn’t need gas or were so shocked by the increase that they muttered to themselves about getting ripped off and drove on in search of cheaper gas.  The latter point was proven to me as I was filling up.  A little ol’ blue haired lady pulled in behind me.  She sat up so she could see over the car door and I watched her study the price on 3 or 4 pumps as she looked for a lower price, each time shaking her head.  Eventually, she left the station.  She didn’t understand that we were not in a position to shop for cheap gas, we had to worry more about getting gas at all.

Which brings me to an observation that I have made and it is that we, as a country, have lost our survival instinct.  We are so cosseted, so far from having to make decisions about food, water and shelter (and transportation) that we cannot even recognize when one of those things is about to disappear.  Because these things are so easy to come by in America, we do not really get too agitated when our property is threatened.  Kind of like it is now by our congress.  Yes, people are pissed off and we are all supposedly poised to vote the bums out.  The town halls of last August were a thing of beauty.  This is a thing of beauty:

But in the end, we have to take action.  Obama and the congressional Democrats are clearly ignoring us.  They seem the think that they are only there to represent the nutroots and not the whole country.  We must keep the pressure on them, we must be unrelenting.  We cannot take our eyes off of them, not for one minute, because they will duck into a smoke filled room and pull off some shit.  They’re doing it right now on health care.  They’ll pay at the polls next time around, but we have to make them pay every day between now and then.  Write them, email them, call them.  Do not back down.

Back to Germany.  The critics there are going after Angela Merkel, as could be predicted.  Merkel has cut individual taxes, among other things, though not by a whole lot.  I am not conversant with the German economy, so do not know if they are in as bad a way as we are.  I assume so, since the whole world is pretty much in the shitter right now.  But this is a perfect chance to see the theories of Hayek and Friedman played out against the theories of Keynes.

I wish we were getting the Hayek/Friedman treatment.  Germany will recover quicker than we will.  Just watch.

How to Fix Healthcare With a Healthy Dose of Capitalism

A personal story:  Back in about 2002, my now ex-wife and I were both out of work and thus out of health insurance.  She developed bursitis in her shoulder, a problem that she had had once many years before.  She lived with it for a while, but eventually she couldn’t bear the pain any longer and needed medical attention.  She knew from her previous experience that a cortisone shot would clear it right up, so I set about finding a doctor that would do the job for a reasonable charge.

I started calling doctors in our little town and the story was pretty much the same from all of them; $200 deposit, x-rays, treatment, office charge, etc.  Most of them could not readily give me a price; they didn’t know it but eventually I got numbers and they all came in between $800 and $1000.  All we wanted was the cortisone shot; she knew what was wrong and what would fix it.  We didn’t want x-rays or any of the other crap they were all talking about.

Finally, I found a doctor (and actually got to speak directly to him!), explained our situation and what we needed and he agreed to give her the cortisone for $120.
That is how markets work; a buyer shops for what they need and finds it at a price that is suitable and the deal is done.  In one hour on the phone, I knocked the price down by hundred’s of dollars.  Think what would happen if we all did that every time we needed medical attention.

She got the shot and in short order was as good as new.  Pretty damn simple, if the assholes in Washington would just get out of the way and let it happen.

GM Offers Discounts to Members of the National Community Action Foundation—You Know, Community Organizers

Government at work, picking and choosing its favored constituencies.  The left sees nothing wrong with this, the choosing of what they see as preferred parties to receive benefits.  Such actions are evident in everything that government does, particularly at the federal level and inevitably leads to market failures.

You know, like what happened with Fannie Mae and the whole loaning-money-to-unworthy-borrowers-thereby-causing-the-near-total-collapse-of-the-world-economy thing.

One of two things has happened here; either this incentive came down to GM from their New Boss, pictured here in his customary looking-down-his-nose pose:

Or, GM took it upon themselves to attempt to curry favor with The One.  Supplication to the gods, as it were.  Either way, it is politics-driven, not market driven and that is a problem.

More such shenanigans reported here by NRO.  Any chance that GM had to survive was doomed the minute it took government money.  They were probably going to go bankrupt soon anyway, now they will die the death of a thousand cuts, inflicted by politicians as they slice it up for their own ends.

"Obama says he's looking at any way to create jobs"

Except lowering business taxes.

Or personal taxes.

Or the cost of hiring someone.

Or lowering minimum wage.

Or minimizing regulations.

Or simplifying the tax code.

Or keeping the Bush tax cuts in effect.

Or actually spending the ridiculous "stimulus" money.

But other than that, He's hard at work looking for ways to create jobs.

Real World Results Don't Matter

Politicians in general and Obama in particular don't let real world results affect their decisions.  In fact, the Left seems to believe that they can somehow centralize and handle our needs better than the Soviets did or better than the European socialist countries have just as the Right is convinced that unfettered free markets will always produce the desired results.  (And I am in the unfettered category; it's never been tried, though and never will be.)

Case in point:  Wendy Button, and her experience with attempting to obtain health insurance after relocation from Washington DC to Massachusetts.   The so-called "free" health insurance that she must purchase as required by RomneyCare is far more expensive than what she paid in DC.  And this is the problem that Obama's requirements for reform will cause.  He insists that pre-existing conditions not be allowed.  This means that the insurance companies have no choice but to price for the recurrence of possibly high cost health problems.  Price goes up.  Obama wants there to be no caps on coverage.  Price goes up.  Obama wants every single person covered but makes no changes to tort law or to break down competitive barriers across state lines.  Price goes up.

So we can have everything that The One wants to "give" us.  We just need to be prepared to pay more for our "gift".  He's not creating competition, He's driving costs up with one set of actions and attempting to lower them with another set of actions.  We should expect nothing more from a man who has spent his entire life in the Ivory Tower and has little real-world understanding of what it takes to run a business.

In Which, While in my Underwear, I Critique a Nobel Prize Winner

Paul Krugman, in today's New York Times laments the absence of Richard Nixon in the White House today rather than the current office holder.

"But the Nixon era was a time in which leading figures in both parties were capable of speaking rationally about policy, and in which policy decisions weren’t as warped by corporate cash as they are now. America is a better country in many ways than it was 35 years ago, but our political system’s ability to deal with real problems has been degraded to such an extent that I sometimes wonder whether the country is still governable."

So, what was that era of American politics really like? It was a time when the Democrats had been in power for so long that the Republican party had acclimated so thoroughly to being the minority party that they mounted no real challenge to the Democrats in the House and the Senate. Instead, they sought to pick up a few crumbs here and there that the Democrats tossed their way after funding things like, oh, I don't know-the ultra successful War on Poverty. Republicans in that era weren't so much an opposition party as they were inside players, skilled at greasing the skids in order to maintain their own access to the public coffers. They didn't challenge the Democrats in either philosophy or the execution of that philosophy. So Krugsie laments the loss of a time when Republicans were compliant and easily manipulated with a few bread crumbs.

When you hear Krugman and others on the Left decry the lack of civility and bipartisanship in politics today, what they are really moaning about is that the Dems can't roll the Reps any more. Hell, they can't even roll the Blue Dog Dems any more. Somewhere along the line over the last 30 years, conservatives and libertarians found their voice and formed a clear understanding of those beliefs. And because these beliefs are principle-based, not desire based, they don't yield. In short, the Krugmans of the world can't stand the fact that the conservative side of the country dug in its heels and started to push back. For me personally, this crystallization of thought began about 3 years after I got out of college, in the time of Reagan.

Read this passage from Krugman:

"Right now, Republicans are balking at the idea of requiring that large employers offer health insurance to their workers;"

I don't know of anyone who is balking at that idea. In fact, many people in this health care debate would like to see employer-based health care come to an end. Further, the market for employees already dictates that large employers provide health insurance. It's a ludicrous statement for Krugman to make.

And then Krugman gets it completely wrong:

"So what happened to the days when a Republican president could sound so nonideological, and offer such a reasonable proposal?

Part of the answer is that the right-wing fringe, which has always been around — as an article by the historian Rick Perlstein puts it, “crazy is a pre-existing condition” — has now, in effect, taken over one of our two major parties."

How condescending. What an ass. The disagreement over health care reform, or health insurance reform, isn't based on a reasonable proposal from the Democrats. What the Democrats are proposing isn't reasonable to people who have a firm belief that health care, and the responsibility for it, is better left to the people who need it and the people who provide it. The socialist Left is dumbfounded that people wouldn't want a government provided program for everything (see "What's Wrong With Kansas"). The conservative/libertarian right is dumbfounded that some people believe the government should be their Sugar Daddy and parcel out everything we need to live.

Obamacare is a dangerous expansion of government, period. Neither I nor any clear-thinking person can see the benefit of that, never mind the anti-competitive nature of it. We simply can't see the wisdom or benefit in turning over so large a component of the private sector to the government. The socialist Left is seriously misjudging the anger being shown at town hall meetings these days. Obama and the crew are trying to ram something through with little if any debate or discussion. Elected representatives stand in front of these town hall meetings and read talking points designed to sell the plan rather than talking substantively about the bill at hand. People see this and quite rightly they go ballistic.

The hell of it is, there is quite a lot of agreement between the two sides about health care and, I believe, a real willingness to fix it. But when the party in power tries to shove something down our throats, we fight back. Areas of agreement include:

• Health care costs too much
• We should eliminate employer-provided health care. We need true portability.
• We don't like having either insurance companies or the government between us and our doctors
• Medical providers need relief from the administrative nightmare they face every day
• The ultimate responsibility for one's health resides with the individual. People need to eat properly and get enough exercise. We should do more to encourage the acceptance of this responsibility.
• Pre-existing conditions should be more limited in scope. The other side of this double-edged sword is that insurers will price for recent conditions, as they should. My ex-wife was recently denied coverage because the insurer thought that she had had a sprained knee within the last 30 days. A sprained knee. (She appealed and got the coverage.)

I am a big believer in the use of Health Savings Accounts coupled with major medical coverage. John Mackey, CEO of Whole Foods recently wrote about how his company uses these to control costs and places more responsibility in the hands of his employees and he was excoriated by his Volvo-driving, tofu-chewing customers. He was accused of being anti-healthcare reform, which was ludicrous. He just didn't care for Obamacare and has a workable, proven alternative. Since the Whole Foods plan works, there is no chance that Obama, Krugman or any of the fringe Left will adopt any of its methods.

Krugman goes on to whine about corporate lobbying in Congress. Blah, blah, blah.

So, I propose a compromise for health care. The socialist Left is bent on a giveaway, so let's do this. The government just handed as much as $4500 to everybody who purchased one of the government's preferred automobiles. Let's declare the Whole Foods plan to be the government's preferred plan, eliminate employer-provided health care and then give everyone $5000 (the annual limit) in a Health Savings Account. And then let the market do what it does best, wring the fat out of the market. This compromise would satisfy the right's desire to make the health care market function more like a free market and would satisfy the left's burning desire to give other people's money away.

Nah, better not. It might work.