Hudson Valley LP Blog

Near the end of The Wizard of Oz, the reader learns that the wizard is really an ordinary man behind a curtain. He describes himself as a good man but a bad wizard.

In a few refreshingly candid moments in the President's speech last night, we caught a glimpse of the admittedly well-meaning man behind the curtain, as he revealed a few of the secrets behind his magic.

How will medical coverage become universal? To quote:

...under my plan, individuals will be required to carry basic health insurance – just as most states require you to carry auto insurance. Likewise, businesses will be required to either offer their workers health care, or chip in to help cover the cost of their workers.

So free health care really means mandatory medical premiums. Behold the master illusionist at work.

Also, we learn that

Under this plan, it will be against the law for insurance companies to deny you coverage because of a pre-existing condition. As soon as I sign this bill, it will be against the law for insurance companies to drop your coverage when you get sick or water it down when you need it most. They will no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or a lifetime. We will place a limit on how much you can be charged for out-of-pocket expenses, because in the United States of America, no one should go broke because they get sick. And insurance companies will be required to cover, with no extra charge, routine checkups and preventive care, like mammograms and colonoscopies – because there's no reason we shouldn't be catching diseases like breast cancer and colon cancer before they get worse.

Sounds good, but wouldn't the insurance companies have to respond to this change by raising their rates, or even leaving the business altogether? Not to worry:

I will not sign a plan that adds one dime to our deficits – either now or in the future. Period. And to prove that I'm serious, there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promised don't materialize.

As for insurance companies leaving the business:

But an additional step we can take to keep insurance companies honest is by making a not-for-profit public option available in the insurance exchange. Let me be clear – it would only be an option for those who don't have insurance. No one would be forced to choose it, and it would not impact those of you who already have insurance. In fact, based on Congressional Budget Office estimates, we believe that less than 5% of Americans would sign up.

But the biggest proposed rabbit in the hat is cost savings:

Second, we've estimated that most of this plan can be paid for by finding savings within the existing health care system – a system that is currently full of waste and abuse. Right now, too much of the hard-earned savings and tax dollars we spend on health care doesn't make us healthier. That's not my judgment – it's the judgment of medical professionals across this country. And this is also true when it comes to Medicare and Medicaid.

Agreed. But what does this do for the fears of seniors who a;ready have medicare? It re-stokes the fears that rose to the surface earlier with the phrase "death panels". The wizard addresses this head-on:

That is why not a dollar of the Medicare trust fund will be used to pay for this plan.

Oh. And if that is not reassuring enough:

Some of people's concerns have grown out of bogus claims spread by those whose only agenda is to kill reform at any cost. The best example is the claim, made not just by radio and cable talk show hosts, but prominent politicians, that we plan to set up panels of bureaucrats with the power to kill off senior citizens. Such a charge would be laughable if it weren't so cynical and irresponsible. It is a lie, plain and simple.

Oh good. I was worried there for a minute. I guess they will save money by using divining rods to find waste and abuse. The President must simply have forgotten to explain this fully.

One more question nags at me. Just suppose that the new restrictions on insurance companies cause some of them to leave the business, leaving people uninsured. Wouldn't the public agency have to pick up those people?

[Insurance companies] argue that [they] can't fairly compete with the government. And they'd be right if taxpayers were subsidizing this public insurance option. But they won't be. I have insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects.

Yes, Mr. President, your intentions are impeccable. I applaud you for conceding that the critics would be right if taxpayers were subsidizing the public option. But free goods are invariably over-used, This excess of demand over supply has caused rapid inflation in health care prices since the inception of medicare. So wouldn't congress in the future face political pressure to fund this public option, just as it funds virtually every other program it has ever set up?

Where would that leave us? Socialized medicine? Well, imagine that. Who could have predicted it?

Generations have come and gone since "socialized medicine" was a damning phrase. What, after all is so wrong with the idea?

When government enacts a policy in law, it is protected from lawsuits by sovereign immunity. As it must use force in some form, it cannot let itself be held liable if someone disagrees with a policy that seems to cause harm. Thus, taxpayers and patients cannot expect redress through the courts.

However, there are cases when some statute allows damages to be paid. But with a public provider they are paid by the taxpayer rather than by whoever caused the harm. No one goes out of business, so there is less chance that the general quality of care will improve as a result; there is less incentive even to fire bad doctors.

We depend on civil courts to redress damages in the private sector. A secondary effect is to improve the general quality of services by financially punishing bad providers. Neither effect can be expected to occur when the supplier is in the public sector.

The free market provides an immense spectrum of approaches to health care. This allows the consumer to select the approach he or she is most comfortable with. Inevitably, a public provider will offer a much narrower range of options.

Once such a social program starts there will be no going back for a very long time; witness Medicare. You will not be able simply to cancel and take your business elsewhere. Socialized medicine must ultimately contribute to both of life's certainties: death and taxes.

Socialism is tyranny, whether it affects the whole economy or only some selected portions thereof. It is incompatible with liberty, that is to say, with life.

Further Reading:
Greeks Falling Out of Their Trojan Horse

The Federal Government has appropriated funds to develop carbon sequestration as a solution to global warming. Not to be outdone, the Supreme Court has held that carbon dioxide is a pollutant within the meaning of environmental law. The vision is that at vast public expense we may avoid the specter of global warming by burying the harmful global warming gas carbon dioxide (geological sequestration).

Remember carbon dioxide? Usually called CO₂, this is the gas we exhale after inhaling oxygen, O₂. Diagrams in my public school books showed the carbon cycle: nearly all plants and animals use respiration, converting oxygen to carbon dioxide. Green plants of all kinds in the presence of sunlight convert carbon dioxide to oxygen using photosynthesis. Chlorophyll is the substance that makes this possible, and which lends its green color to the environmental movement. Is there anyone out there who has failed to have heard about this?

One proposal then, already well underway, is to bury carbon dioxide. With each carbon atom buried, we also bury two oxygen atoms. These atoms will not be available for future generations of humanity to inhale. The carbon will not be available for future green plants to convert. Amazingly, this proposal comes from the green movement that uses the word "sustainable" as a mantra.

Let's trace the verbal magic that made this irrationality possible. (1) There is global warming. (2) Global warming is bad. (3) CO₂ increases global warming. (4) Hence CO₂ is bad. (5) We must destroy CO₂ any way we can.

This is not the first time that our government has demonized some essential life process. Certain nutrients have been so severely restricted by the FDA that great harm has been done. Limits on folic acid caused spina bifida in infants. Limits on iodine have increased the incidence of thyroid malfunction. More recently the drumbeat against salt and fats threatens at least four more of the forty-odd essential nutrients.

There is a recurring pattern here. In the early 20th century, alcoholic beverages were demonized under prohibition. A few years later, falling tax revenues persuaded the new Roosevelt administration to end prohibition. School children will forever see two amendments to our constitution that negate each other.

Good and bad, right and wrong. This division into just two alternatives is often called Manicheanism. We see it in the great religions. It fits perfectly into the political process, where the principle tool is prohibition. The idea is quite simply to prohibit evil. Conservatives are accused of trying to legislate morality. Liberals are accused of adopting statism as a secular religion. In any case, the result is a growing mountain of law and regulation, and an ever-growing prison population.

Do we need all of these laws? Children in Sunday school learn the ten commandments. Ten seems a manageable number. George Carlin once helpfully reduced the number to two . See also the Ten Thousand Commandments.

No one, including legislators, reads or understands proposed legislation. Most people are too busy to care; law is left to lawyers. Yet congress acts as if we could achieve perfection if only we had enough laws. So the gap between what is prohibited and what is mandated narrows. Crushed within that gap lies liberty.

It need not be so. Manicheanism may be ancient, but so too is trade. Economics teaches us to consider costs and benefits. Every choice involves a trade-off between something gained and something lost. This leads to a more complex world-view. This view is often portrayed as gray or dismal; I think not. It replaces the notions of good and evil with the notion of quality. Where good vs. evil has only two values, quality can vary continuously and in multiple directions. In judging quality we are asked to distinguish better vs. worse rather than good vs. bad. Just as important, it is not required or even desirable that your notion of quality coincide with mine. Differences in subjective preferences permit exchanges in which each party benefits in his own eyes. Without such differences neither party to an exchange would have an incentive to make the trade.

Thus, the ideal in the Manichean view is that everyone should share the same values. Economics teaches that progress and prosperity result when they do not.

Our two major parties each contain an ever-shifting coalition of strange bedfellows. However, a fairly constant theme during the last century has been that the political right places more importance on the market mechanism, while the left values political solutions more (the 19th century was notably different). It amounts to economics vs. Manicheanism. If the right is to regain credibility, it should try to rid itself of its own Manichean tendencies. If the left is to refrain from marching us off a cliff, it should take economics more seriously.

Perhaps our brain power can be put to better use, providing new or improved economic and political systems. Until then, we can at least try to understand the merits and weaknesses of the systems that we have, speading the word as best we can.

When banking executives appeared before congress this winter, we all got a rare view into the conscious deception that underlies our representative democracy. The executives just could not seem to play their parts according to script. First the financial executives forgot that they were supposed to be in dire financial peril and disgrace, having taken their various enterprises to ruin. They pocketed handsome bonuses, well earned as a result of their successful negotiation of a massive bailout by the federal government. But they forgot that they were supposed to have hats in hand, begging for the bailout. The Feds were supposed to grant them their wish only because we ordinary citizens would face financial calamity if they did not get it. The damage to the government's cover story was such that in order to repair the damage it was necessary to consider confiscating the bonuses through legislation. The Nevada hotel industry also had to be sacrificed in order to defend the pristine reputation of the government. We were not to forget that they were doing it all for us, the little people.

Then the auto executives arrived in separate private jets. Sacre bleu! What theater school did these clowns attend? Take it again from the top. Okay. I seem to recall that the next time they all arrived in the same VW bug, but that can't be right. No matter. One of the lead actors had to be fired from the cast.

The scripts for these theatrical masterpieces were written some time ago. The banking story is variously told, but usually involves Jekyll Island. There some of the leading bankers of the day plotted the formation of a central bank that would become the Federal Reserve. This was all done in great secrecy, because the bankers did not want it to be known that they sought to be regulated. The cover story, which was already becoming familiar, was that regulation was needed to limit their own excesses. The truth was slightly different. They wanted access to unlimited reserves of funds to forestall failure. They would be considered too big to fail. They got their wish, and the Federal Reserve delivered big time this past winter. Pay no attention to the man behind the curtain, or to the fact that congressmen have received generous campaign contributions from the banking sector over the years.

How does this pattern explain the GM bailout? Probably the main campaign constituency to be hurt by a GM failure is organized labor. The loss of so many jobs, particularly unionized jobs, would be a great embarrassment to a Democratic administration. Poor Lehman Brothers. Too few friends in high places.

Don't look now, but each federal agency serves an organized constituency. There is no cabinet secretary for the unorganized little guy or gal. Homework: figure out how each organized constituency screws the little guy. For example, Social Security (representing those with gray hair) screws the young worker with a family, who must pay over 15 percent of his gross pay, from the first dollar earned, to support old codgers like yours truly who have had a lifetime to try to provide for themselves.

Since we oldies had to do the same thing, and have expected the support at retirement, we neglect to feel guilty.

But perhaps guilt is not the appropriate emotion anyway. Chagrin, embarrassment, mortification: these fit the situation better. We have been accepting cover stories from The Important Ones without question. Our birthright of liberty has been exchanged for baubles and trinkets. Nearly all of us belong to some constituency granted favors by the government, so we feel co-opted, beholden. We dutifully return our congressman to office every two years.

In return for the favors (baubles) granted to us, we have entrusted the value of our money to a printing press. We have entrusted our health to drug companies-- peddlers of poisons. Our property is not ours to use unless we have permission from faceless committees, some of them in Washington. We have entrusted the education of our children to the same people who write the cover stories, yet often school taxes are too expensive to bear. In other words, the exchange of value has not been a particularly good deal.

Perhaps the medical reforms now in congress will save us from our mortification. "Mortification syndrome" may be added to the medical lexicon, and low-cost lobotomies (co-payment only) prescribed so that we can enjoy all of the latest cover stories in peace.

It is not news that the papers are in serious trouble. Free information from the web is replacing the purchased kind. The old sales model is failing. New ways to profit from intellectual property seem needed.

Rather than try to invent something, let's look around for other models already in use. I am a member of a computer association that provides free access to two sources of online books. Certain books from the catalogs of several publishers are offered for viewing. I have found this service very useful, in fact, it helps me to justify my continued membership. I currently also have a subscription to a music service with a large selection of material. What keeps newspapers from trying something similar?

Specifically, rather than charging a subscription fee to one newspaper, why not offer, for a fee of similar size, on-line access to a wide selection of newspapers? This could both preserve the subscriber base that exists and greatly expand the value of each subscription to the public. This could save the newspapers as businesses and as an asset to the voting electorate.

Actually, there is a reason why this might not work. It is called antitrust. According to Wikipedia, the Sherman Act begins as follows:

"Section 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine....

Section 2. Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine...."

This language, in the words of Mark Twain, serves to concentrate the mind. It might well dissuade a business from trying to save itself and its competitors by combining with them in any way.

Are we well served by these antitrust laws? Searching Mises.org for "antitrust" provides many articles that dispute this on economic grounds. The consensus among Austrian economists seems to be that a true monopoly can exist only when government prohibits competition in some area. The proposed newspaper combination would be voluntary in that no one would be forced to buy a subscription and no newspaper would be forced to join the group.

If our newspapers fail, let some of the blame fall on the burden of needless and harmful laws that we labor under.