The Economy - April 2010

An Age of Untruth - Victor Davis Hanson

Recoil from the word “stimulus” — whether used by a Republican or Democratic administration. There is no such thing as an easy, fuzzy notion of instant money creating economic growth. Instead it is a euphemism not for borrowing, but for massive borrowing and unsustainable debt. Indeed, note that we do not even use words like “borrowing” or “debt,” but instead prefer “deficit” (e.g., It’s only a year-to-year thing) and “stimulus” (e.g., spending what we don’t have somehow makes us richer in the future).

“Stimulus” is thus a lie as it is used, or at best a half-truth.

The truth — even if right now we were to go ahead with a return to the Clinton tax tables, raise the caps on income subject to Social Security taxes, have the states keep increasing their sales and income taxes, and apply new Obama surcharges on health care — is that we are still going broke.

Do the math: $12 trillion is a lot of debt ($40,000 for each of us, $200,000 for a family of five starting out in the world — like a second home mortgage in other words). Twenty trillion dollars in just eight more years is doom (like two family vacation homes to pay for without the vacation homes to vacation to).

Still Government Motors - Shikha Dalmia

But when Mr. Whitacre says GM has paid back the bailout money in full, he means not the entire $49.5 billion--the loan and the equity. In fact, he avoids all mention of that figure in his column. He means only the $6.7 billion loan amount.

But wait! Even that's not the full story given that GM, which has not yet broken even, much less turned a profit, can't pay even this puny amount from its own earnings.

So how is it paying it?

As it turns out, the Obama administration put $13.4 billion of the aid money as "working capital" in an escrow account when the company was in bankruptcy. The company is using this escrow money--government money--to pay back the government loan.

ObamaCare - April 2010

The coming primary-care physician shortage under ObamaCare - Ed Morrissey

Reimbursement rates aren’t so much the problem as the reimbursement system itself — especially for standard health-care delivery. The third-party payer system interferes with the normal pricing mechanism that allows supply to meet demand and on-time delivery. The more that primary-care business depends on arbitrary reimbursement rates at all, the less likely that doctors will choose to meet that demand, instead selecting other disciplines where their services get compensated more honestly and appropriately.

We’re about to make the problem worse by creating an even greater artificial shortage of providers than we currently have. That won’t help the people that ObamaCare purports to serve, and will only make it worse for the rest of us.

What’s the Best Fix for Health Care? - Scott Rae

Well, first of all, I’m not in favor of the government taking it over. In my view, that’s a cure that’s worse than the disease. I think that there are some fairly simple things that can be done that can make a big difference. First, there is no reason why insurance companies shouldn’t be allowed to compete across state lines. That would go a ways toward bringing the cost of insurance down. Second, the law should change so that all medical savings accounts roll over year after year — allowing for a long-term savings account rather than an annual account. There are some states where they do allow that, but we need to make that universal across the country. Third, I think we need to reconfigure how we view insurance. I don’t expect my auto insurance to pay for oil changes and tire rotations and alignment. But I do expect my auto insurance to pay for major accidents, acts of God, that kind of thing.

The combination of medical savings accounts that roll over and competition for higher-deductible insurance that would protect people from catastrophes would go a long way toward controlling the costs. Part of the thing that keeps the costs inflated is that somebody else is paying for it. I would do all sorts of things for my car if somebody else was paying for it, but I don’t because I’m paying for it. I think taking the third-party payer out of it to some degree would bring incentives back to individuals to ration care for themselves. The other thing — and this is not a simple thing — but the tort system where people can basically win the lottery through malpractice lawsuits has to be changed. Doctors won’t stop practicing defensive medicine until that’s changed. I would favor some sort of cap on malpractice settlements.

Oh, THOSE Death Panels! - John Hinderaker

The New York Times explains the thinking behind Obamacare:

The federal government is now starting to build the institutions that will try to reduce the soaring growth of health care costs. There will be a group to compare the effectiveness of different treatments, a so-called Medicare innovation center and a Medicare oversight board that can set payment rates.

But all these groups will face the same basic problem. Deep down, Americans tend to believe that more care is better care. We recoil from efforts to restrict care. ...

From an economic perspective, health reform will fail if we can't sometimes push back against the try-anything instinct. The new agencies will be hounded by accusations of rationing, and Medicare's long-term budget deficit will grow.

James Taranto adds:

Having taken on, over the objections of the public, the responsibility for everyone's medical care, the federal government may not be able to keep its promise: "Eventually, we may well have to decide against paying for expensive treatments with only modest benefits."

Oops, sorry about that, Gramps!

It seems as though this is a pretty strong argument against ObamaCare. But we need to encapsulate it in a pithy phrase. What would you call governmental institutions that empower bureaucrats to decide when to deny medical treatment--panels, as it were, that have the authority to determine when a patient's death is necessary for the health of the fisc?

California - April 2010

California's $500-billion pension time bomb - David Crane

The state of California's real unfunded pension debt clocks in at more than $500 billion, nearly eight times greater than officially reported.

That's the finding from a study released Monday by Stanford University's public policy program, confirming a recent report with similar, stunning findings from Northwestern University and the University of Chicago.

To put that number in perspective, it's almost seven times greater than all the outstanding voter-approved state general obligation bonds in California.

Calif. climate law under assault in poor economy - Samantha Young

Petition backers say California cannot afford to impose environmental regulations that would raise utility bills, fuel prices and cost jobs. Republican lawmakers say the law gives companies another reason to flee California or locate elsewhere when they decide to expand.

That may be an appealing message to voters who are frustrated with high unemployment, continuing home foreclosures and an ongoing state budget crisis that has forced deep cuts to social services, public schools and higher education.

Who'da thunk it?