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Category Archives: Economics
Medicare Is Going To Bankrupt Us
…therefore, we need universal care. Megan McArdle, on the insanity of that “argument”:
I hear this argument quite often, and it’s gibberish in a prom dress. Any cost savings you want to wring out of Medicare can be wrung out of Medicare right now: the program is large and powerful enough, and costly enough, that they are worth doing without adding a single new person to the mix. Conversely, if there is some political or institutional barrier which is preventing you from controlling Medicare cost inflation, than that barrier probably is not going away merely because the program covers more people. Indeed, to the extent that seniors themselves are the people blocking change (as they often are), adding more users makes it harder, not easier, to get things done.
It’s not an argument. It’s sophistry in the service of socialism.
Choking Off Recovery
One of the disengenuous tactics of the Democrats in support of Porkulus was to imply that conservative economists agreed with it, and in fact they actually lie about this. For instance, the other day, I heard Governor Rendell defending Arlen Spector’s vote on it by saying that. But what conservative economists agreed on was that some sort of stimulus was needed, not that legislative atrocity. One of the economists slandered thus was Martin Feldstein, who has a piece in the Journal today on the potentially disastrous effects of upcoming tax cutsincreases on the economy.
The current outlook for an economic recovery remains precarious. Although the stimulus package will give a temporary boost to growth in the current quarter, it will not be enough to offset the combined effect of lower consumer spending, the decline in residential construction, the weakness of exports, the limited availability of bank credit and the downward spiral of house prices. A sustained economic upturn is far from a sure thing. This is no time for tax increases that will reduce spending by households and businesses.
As Tigerhawk notes, “You cannot spread wealth that hasn’t bee created in the first place.” But so-called liberals think that wealth is something that just happens, and that all that need be done is to properly distribute it.
Keep Bleeding The Patient
The Democrats want to return to the days of bad loans and too-easy credit:
Am I missing something here, or have our elites already erased from their consciousness the fact that easy credit and the lack of responsible budgeting by consumers contributed mightily to our current economic mess? In the fourth quarter of 2008, 13.9% of consumers’ disposable income went to servicing credit-card debt, reports the Wall Street Journal. No shortage of credit there.
Apparently the self-righteous glow that comes from forcing capitalists to make bad bets on preferred victim groups is too strong a legislative addiction to be reined in by the prospect of further economic collapse.
The problem was that it was never in their consciousness to begin with. They find it politically convenient to lie to us and themselves (as they did throughout the campaign) that the problem was caused by “deregulation” and “tax cuts.”
A Budget…
…with no shortage of lies:
A truly serious president would not be fiddling around while our future burns. He would be addressing entitlements (mainly, Social Security, Medicare and Medicaid), which have tens of trillions in unfunded liabilities and constitute 60 percent of the budget. The day of reckoning on this government-generated mess is not all that far off, and when it comes, the economic crisis of the moment will seem small potatoes.
It’s a shame that we don’t have a serious president. It’s amazing that people report on this thing with a straight face. It’s like the coverage of Saddam Hussein’s “election” in which he got 99.9% of the vote.
Chickens Already Coming Home To Roost
Megan McArdle says that we may already be having a problem with sovereign debt risk:
Obama’s spending plans are extraordinarily ambitious. His projected deficits for the rest of his possibly presidency are higher than the “runaway” deficits that plagued most of the Bush administration–and after the first few years, that’s not stimulus, that’s ordinary spending outstripping revenue. For a while now, I’ve been asking people at conferences, on and off the record, what America’s sovereign debt risk is? That is, how long until people stop treating treasuries as the “risk free” securities, and start demanding a premium for the risk that we might default.
The answer from the right has been a nervous (perhaps hopeful) 2-3 years. The answer from the left, and professional Democratic wonks, is some unspecified time in the future. Probably, there will be a Republican in charge. Markets hate Republicans.
But last Thursday, the Treasury auction was . . . well, descriptions vary from “weak” to “horrible”. This raises the unpleasant possibility that markets are, as my business school professors insisted, “forward looking”. Voters may believe that getting a bunch of special interests to agree in principal that costs should be cut is the same thing as actually cutting costs. Bond markets don’t…
…Obama can assure voters that he inherited these deficits. But bond markets pay closer attention to the fact that Obama has already increased the projected deficit he inherited by 50%.
Let’s hope that the voters figure it out soon, and before Treasury has to start paying high interest on T-bills.
Obamacare
And your doctor:
Doctors will consolidate into larger practices to spread overhead costs, and they’ll cram more patients into tight schedules to make up in volume what’s lost in margin. Visits will be shortened and new appointments harder to secure. It already takes on average 18 days to get an initial appointment with an internist, according to the American Medical Association, and as many as 30 days for specialists like obstetricians and neurologists.
Right or wrong, more doctors will close their practices to new patients, especially patients carrying lower paying insurance such as Medicaid. Some doctors will opt out of the system entirely, going “cash only.” If too many doctors take this route the government could step in — as in Canada, for example — to effectively outlaw private-only medical practice.
These changes are superimposed on a payment system where compensation often bears no connection to clinical outcomes. Medicare provides all the wrong incentives. Its charge-based system pays doctors more for delivering more care, meaning incomes rise as medical problems persist and decline when illness resolves.
So let’s expand Medicare to everybody. Great.
I Like The Rail Option, Myself
Thoughts on how to pay for Obamacare.
Also, Tigerhawk on taxes:
I’ve clipped some inflammatory excerpts for your morning indigestion, but it is worth scrolling through to get a sense for the breadth and nature of the proposal. The short version is that President Obama is pushing absolutely staggering increases through the corporate and business tax systems. Direct taxes on business are, in general, inefficient and economically disruptive, but they are also peerless in their complexity, which means that few voters and essentially no reporters will make the effort to understand what is being done to them.
Trust me on this: something awful is being done to you.
That rail option’s looking better and better. With tar and feathers, of course.
[Update a few minutes later]
Obama Trek: the search for more money.
Boldly going where no American fascist president has gone before.
[Update]
They just keep on spending:
If not treated promptly, FSD, like alcoholism, leads inevitably to complete physical breakdown, loss of homes, jobs, cars, respect, everything. The breakdown is not limited to the sufferer, however. Like the alcoholic who must drink hard liquor every waking moment, massive budget deficits are the key symptom of late-stage FSD. The alcoholic dies, but with FSD, the nation, not the spenders, goes bankrupt. Even today, with Obama just beginning to manage the government, Geithner’s Treasury department must offer higher interest rates on bonds it sells to finance planned deficits because bondholders worry about Washington’s future repayment ability if taxes are not soon hugely increased. But those increases would kill economic growth, sending government revenues spiraling downward and eventually leaving Washington only one choice – repudiation of debt or bankruptcy. Either way, American prosperity will be a distant memory for generations to come. Intervention cannot come too soon.
But at least we’ll all be equal in our poverty. And that’s what’s important, right?
$1.8T
That’s the size of the current projected budget deficit for this year:
The deficit for the current budget year will rise by $89 billion to above $1.8 trillion — about four times the record set just last year. The unprecedented red ink flows from the deep recession, the Wall Street bailout, the cost of President Barack Obama’s economic stimulus bill, as well as a structural imbalance between what the government spends and what it takes in.
As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps.
For the current year, the government would borrow 46 cents for every dollar it takes to run the government under the administration’s plan. In one of the few positive signs, the actual 2009 deficit is likely to be $250 billion less than predicted because Congress is unlikely to provide another $250 billion in financial bailout money.
So it’s not all bad news.
Obama didn’t inherit most of this deficit. He created it (or rather, let Pelosi and Reid create it) with the insane porkulus bill, which wasn’t about stimulation at all, but paying off Democrat constituencies. So it’s not surprising that it’s not working. And to the degree that it’s not working, and we get less tax revenue from a shrinking economy, that’s his deficit as well.
Just for contrast, consider that 1.8 trillion was the entire federal budget in the year 2000. This is economic madness.
[Late morning update]
Obama fails the fact check:
-His assertion that his proposed budget “will cut the deficit in half by the end of my first term” is an eyeball-roller for many economists, given the uncharted terrain of trillion-dollar deficits the government is negotiating.
-He promised vast savings from increased spending on preventive health care in the face of doubts that such an effort, however laudable it might be for public welfare, can pay for itself, let alone yield huge savings.
-He pitched a remedy for Social Security’s long-term crisis that analysts say won’t fix half the problem.
Glad someone at AP is finally doing their job.
[Mid-afternoon update]
More thoughts:
President Obama continues to distance himself from this “inherited” budget deficit. But the day he was inaugurated, the 2009 deficit was forecast at $1.2 trillion — meaning $600 billion has already been added during his four-month presidency (an amount that, by itself, would exceed all 2001-07 annual budget deficits). And should the president really be allowed to distance himself from the $1.2 trillion “inherited” portion of the deficit, given that as a senator he supported nearly all policies and bailouts that created it?
The president also talks of cutting the deficit in half from this bloated level. But even after the recession ends and the troops return home, he’d still run $1 trillion deficits — compared to President Bush’s $162 billion pre-recession deficit. In other words, the structural budget deficit (which excludes the impacts of booms/recessions) would more than quintuple.
It’s a good point. What did then-Senator Obama do, if anything, to prevent any of this year’s deficit? If he’d been in charge, it would probably been even bigger, and last year’s as well.
No One Tell Barack Obama
A Tennessee dry cleaner is offering free services to the unemployed:
Magnolia Cleaners will clean a person’s professional job interview clothes, up to $25 per week, according to The Daily Post-Athenian. That amounts to the equivalent of two men’s or women’s two-piece suits and two dress shirts or two dresses.
With the unemployment rate at 13.8 percent in McMinn County, the company wants to help people facing difficult times by giving them a more confident appearance when they interview for jobs.
During the Depression, Roosevelt’s National Recovery Administration arrested a tailor for charging a nickel too little to press a suit. What will his protege in the White House do when he finds out about this?