Obamacare and the fallacy of socialized medicine

Following the rollout of Obamacare over the past few months, many Republicans have watched with much schadenfreude this spectacle of horrendous government ineptitude unfold.  But before they get carried away doing their “I told you so” dance, there are a couple of points to acknowledge and address.

First, Democrats defend themselves by reflexively pointing out that the American healthcare system before the Affordable Care Act (ACA) had some serious problems, which is what prompted them to action.  Fair enough.  Then, replete with snark and smarm, they ask where the GOP alternative is.  That is the trap.  Understanding the desire exists to come up with an alternative plan or amend the existing ACA so as make it palatable, we have to question if any band-aid can be successfully applied.  As anyone knows, if you misdiagnose a problem, the treatment regimen will be ineffectual at best, harmful at worst.

Addressing the first assertion, most agree that the healthcare system had many problems before Obamacare, but can’t really articulate why.  Not everyone could get coverage and prices of goods and services were too high……….but why?  I believe the answer lies in economics.  When you subsidize anything, you invariably raise the price of it because you are artificially lowering the cost to the consumer and thus increasing demand.  That, in turn, contributes to a feedback loop that distorts the price of everything that sets its price based on the value of the initial good.

This applies to healthcare.  Government programs like Medicaid and Medicare sowed the initial seeds of failure within the healthcare system by artificially setting prices (in the form of reimbursement costs) of everything from pills to MRIs to hemorrhoid donuts by government fiat instead of letting markets determine the price.  Once those initial goods and services had their true prices distorted by government intervention, the prices of everything else related to them followed suit.

Since the price the government sets differs from the actual cost to the providers in the private market, those providers relying on government reimbursement had to raise their prices in order to make money and continue to operate.  But now, everything else that had been basing its cost relative to those items/services had to rise as well, hence the upward cost spiral that has people paying $30 for an aspirin at the hospital and hundreds of thousands of dollars for major surgery.

This leads us to the misdiagnosis by the Democrats.  Their solution (socialized medicine) injects MORE government into the market, which is the EXACT OPPOSITE of what should be done.  This reminds me of a poignant quote by German economist Roland Baader, who observed that “the political caste must prove its right to exist, by doing something.  However, because everything it does, it does much worse, it has to constantly carry out reforms, i.e., it has to do something, because it did something already.  It would not have to do something, had it not already done something. If only one knew what one could do to stop it from doing things.”

The correct prognosis, of course, is to let the free-market do what the free-market does—supply will meet demand and the resulting equilibrium will set the price of the good or service, all without government intervention.  Impossible?  Then answer how Devi Shetty, the “Henry Ford of heart surgery,” is able to provide cardiac surgeries at a tenth of the cost it would be in the US at his hospital in India.  It is partly because he leverages economies of scale, but mostly because of the simple fact that if he charged $20K-$100K to poor rural Indians, he would have exactly ZERO customers.  What happens then?  The doctor cannot make a living and leaves and the community is left with many people with untreated cardiac afflictions.  Nobody wins.  Which brings us back to the simplest maxim of economics; something is worth what someone is willing to pay for it.  That’s it.

Further, the second and third order effects of this help are almost always negative and exacerbate the initial problem.  By “socializing” healthcare, we’re actually harming society as a whole.  Why take care of yourself when you can foist the costs of your irresponsible behavior onto everyone else?  When you don’t have to directly pay for the consequences of your poor choices, you make more of them.

Now, there is a legitimate debate that can be had about any government involvement within the healthcare system, and I stand ready to have it.  For example, to protect against pandemic airborne diseases that could negatively affect American society as a whole and are not resultant from poor individual choices, it can be argued that government entities such as the Centers for Disease Control (CDC) fall under the general welfare clause of the Constitution and should receive federal monies.  After all, airborne pathogens do not recognize state boundaries or socio-economic status.  But that is a far cry from a government agency that dictates what treatments I can have or what a particular service should cost.  Unfortunately, no one seems to have thought that far ahead, certainly not those who conjured up this Obamacare monstrosity in the first place.

Scandal, Credibility, Irony


On top of the ongoing Benghazi fiasco (State/CIA/White House), the Pigford settlement scandal confirmed by the New York Times last month (billions in fraudulent claims paid out by Dept of Agriculture), and the ethical questions swirling around HHS Secretary Kathleen Sebelius pushing healthcare industry executives to make “donations” to non-profits to promote Obamacare, we were treated to two new gems this week.

First, the Justice Department secretly seized two months of reporters’ phone records to monitor the news gathering activities of the Associated Press in what could very well be a violation of the constitution.  Second, it was revealed that the IRS was specifically targeting conservative groups applying for non-profit status to subject them to “additional scrutiny” as far back as two years ago in an increasingly Nixonian-sounding intimidation effort.  In short, it’s been a terrible week for the President.

The press just got a jarring wake-up call as to the potential dangers of unchecked power, even from their liberal darling.  They SOOO wanted to believe that President Obama was our nation’s savior after the Bush years that they treated him with deference, but here’s the thing.  People aren’t as stupid as liberal elites take them for.  Because the mainstream media (MSM) gave him a pass for so long, people could see that they were getting propaganda, not good journalism.  So they changed the channel, which hit those news organizations right in their bottom line.  I guess in order to recapture those lost profits, the MSM figured out it needed to go back to doing its job.  This has been an angry and abrupt turn by the fourth estate.  It’s also long overdue (see previous post from March).  Let’s see how the Administration handles itself without having an utterly pliant, supine, and adoring press.  Fame is a fickle mistress, Mr. President.

As for the IRS scandal, this smacks of dirty politics and abuse of power (hope and change, anyone?).  Preventing these groups from gaining non-profit status before the 2012 elections invariably silenced their potential political voice and may have had an impact on the outcome of the election.  Couple this with other election year antics like asserting dubious legal authority to waive federal welfare-to-work requirements (sop to the poor), approving selective enforcement of immigration laws (sop to Hispanics), and approving a student loan interest rate freeze (sop to students), and you begin to see the lengths people will go to in order to maintain their grip on power.


You are seeing what happens when you lose it.  In Washington, your “corridor reputation” is your most important asset and once lost, credibility is extremely hard to regain.  The fact that no one has been fired as a result of any of these incidents (save two mid-level IRS folks who were retiring anyway) is disgraceful.  However, I would argue the moment that this President “jumped the shark” was earlier this year (March 1, 2013, to be exact) when all the doom and gloom he and his fellow Democrats predicted as a result of sequestration didn’t happen.  It should have been obvious to them that they were overselling the sequester cuts, as anyone who has ever done math will tell you that 2% reduction of anything is not “catastrophic.”


It was just the week prior to this maelstrom at Ohio State University’s commencement that Obama called on students to “reject the voices that warn about government tyranny” and dismissive of concerns that “tyranny is always lurking just around the corner.”  Open mouth, insert foot.  In fact, Obama and the left have consistently been dismissive of these warnings of government overreach precisely because they do not have an understanding of history and those that forget history are doomed to repeat it.

In matters such as these, my default position tends toward Hanlon’s Razor, which states that one should never attribute to malice that which is adequately explained by stupidity.  In the interests of maintaining my credibility, I won’t speculate on what the White House may have known about all of these controversies or when they knew it until more information is revealed.  But I will close with a poignant observation.

If this is incompetence rather than nefariousness, and talking points didn’t get passed up the proper chain or a few “rogue elements” within the organizations in question were acting improperly or there was a misunderstanding of the authorities of the executive or whatever creative excuse the Administration is offering up, doesn’t that prove what Republicans have been saying all along?  That the federal government has grown too large and the federal laws and regulations have grown too onerous?

A cowed and spineless press

Many have criticized the mainstream media in recent years for liberal bias and depending on your political proclivity, you either agree wholeheartedly with that assertion or dismiss it outright as right-wing paranoia.  However, using the recent filibuster by Senator Rand Paul of Kentucky and its subsequent coverage by the media as a benchmark, I was able to observe, hour by hour, the actual coverage by many different networks and news organizations.

I found that CNN, the New York Times, the Washington Post, Roll Call, MSNBC, ABC, CBS, and NBC either didn’t highlight the event as it was unfolding or put it “below the fold,” meaning it ranked in search terms and on their web pages lower than such newsworthy events as  the “Snowquester” and a group of Arabs doing the Harlem Shake.  C-SPAN, FOX News, The Hill, Politico, and the Drudge Report carried the event front and center.

Instead of focusing on this perceived bias though, I thought I would highlight a larger issue; the general laziness and ineptitude of today’s press as a result of budget cuts in the field of journalism.  Over the past few years, the press has gotten increasingly cozy with the objects of their reporting (the White House in particular) and the questions asked have been more or less softballs.  But by sending E! News flunkies to the White House daily briefings and treating the Administration with deference, the press is not doing its job.

A free and independent press is necessary for any healthy democratic institution, as it ensures that the concerns of the citizens are brought to the fore and that those in positions of power are made to answer for their actions.  Now, I understand press and government have a symbiotic relationship.  The press needs to keep its access in order to remain employed, so they have to walk a fine line between asking important (and pointed) questions without alienating the Administration and getting booted from the press gallery.

But because of their inexperience, the press has forgotten that the government needs them too.  A free and independent press contributes to the legitimacy of any government, because any government that cannot withstand the scrutiny of open debate among its citizens is destined to collapse.  If all of the members of the press corps do their jobs and ask hard questions, they’d have strength through solidarity.  The Administration can’t kick them all out because if they did, all that would be left to report the “news” would be government employees, i.e., a propaganda ministry.
Bottom line, the past 4 years have seen a press corps that has spent more time on the First Lady’s wardrobe than they have on extra-judicial killings of American citizens and the gradual erosion of our civil liberties as a result of the “forever war” against terrorism.  President Obama would rather visit the feckless sycophants on The View than engage in a robust debate with George Will or do a 5 minute spot on Fox News.
Apparently Walter Cronkite, Seymour Hersh, Edward R. Murrow, and Helen Thomas are gone.  Well, we need them back in order to hold our leaders accountable for their decisions and challenge them at every turn to ensure they stay in touch with the concerns of the everyday American.  The press used to be the champion for the people; they need to be that again.

100 Years of the Modern Income Tax

February 3rd marks 100 years since the 16th Amendment was adopted to the U.S. Constitution which allowed Congress to impose taxes on income from any source without having to apportion the total amount collected from each state according to population in proportion to the total national population.  Confused?  I was too when I first started reading about this, but I think a little background on direct and indirect taxes will help your understanding of the topic.

Prior to the 16th Amendment, most tax revenue at the federal level was derived from excises, tariffs, and sales taxes; in other words, indirect taxes.  Indirect taxes are essentially taxes that can be avoided legally.  If you don’t want to pay high cigarette taxes, don’t smoke.  Bottom line, the individual can control how he spends his money and, in essence, how much tax he pays.  Freedom of choice was the central tenet of this idea and the Founders believed it to be the essence of liberty.

Since market forces would determine how much money would be taken in yearly (after all, people still smoke, buy and sell goods, pay tariffs on trade, etc), it forced the Treasury to be fiscally prudent and kept the federal government small.  THIS WAS BY DESIGN.

On the other end were direct taxes.  This should be read as taxes you could not escape, i.e., taxes based on ownership or existence (property and capitation).  The Founders were wary of such a tax because they had just rebelled against a king who was imposing taxes of all kinds on a whim and understood the dangerous nature of such power.  Chief Justice John Marshall acknowledged such when he stated, “The power to tax was the power to destroy.”

While the Constitution did allow for direct taxes, it stipulated that they be apportioned among the States and their populations, which in layman’s terms translates to a flat tax.  And you had to have a specific reason to impose it, such as to fund a war.

Now this idea of freedom of choice is also embedded in the composition of our Republic.  The Founders designed the political system to mimic the most successful economic system they had encountered, a free market.  See the 10th Amendment.  With a small federal government and the powers not delegated to it reserved to the States respectively, each state could be a localized experiment, a petri dish in which to create laws reflective of the desires of its people.  For example, don’t like what New York is doing right now with respect to high taxes and gun control?  Vote with your feet.  Currently (in theory), there are 49 other petri dishes out there that might fit your style.  I’m partial to New Hampshire and Virginia.  But that option, that freedom of choice, dissolves the more control is ceded to the Federal Government.

The Founders were also men that understood history and military strategy (as I do) and incorporated that knowledge into their new system.  If you pursue a retreating military force, but leave them an escape route, they will take it.  Press an opposing force with their backs against “death ground” (to be read as no way out but through you), and they are coming back at you 10 times as fiercely, because you’ve cornered them and forced them into a fight for survival.  At the end of the day, as long as men have the freedom to choose, they have an out.  The more federal laws are imposed, the more choice is reduced.  Do you see the parallel now?  Does the importance of a small federal government now make sense?

Which brings us back to the 16th Amendment.  Once ratified, it opened the flood gates for rampant taxation of every kind without constraint which inevitably provided the initial seed money for the Leviathan that Thomas Hobbes warned us about.  Over the past 100 years, the additional funds begat additional agencies providing additional promises and additional services and those services began to outpace the money necessary to pay for them, so more taxes needed to be levied.  But more taxes are unpopular, and politicians seeking to raise money to pay for their pet programs found themselves getting booted from office.  Then they found the credit card.  Now, the programs expand and the people are happy, but the debt grows.  However, that only works as long as the Chinese and Japanese and everyone else continues to buy our bonds and lend us money.  Once they figure out they aren’t getting paid, we crash and burn.

On that, buy yourself a beer or two this Sunday to celebrate this historic occasion—–and be sure to use the credit card.