Health Care Reform: “Change” is Not Necessarily Good

I have a few “issues” with the recently passed health care reform bill. First, it was passed on a totally partisan basis, paying no attention to the views of the citizens who were overwhelmingly opposed to this “change.” This “we know best and have the power” attitude smacks of authoritarianism. Second, it violated a host of important promises ranging from “transparency” to “no tax increases for anyone who earns less than $200,000” (originally $250,000), to the assertion that health care costs are preventing new firms from being formed–a real reach since it is not mandatory, yet, that firms must provide health care insurance. Add to that promises that we can keep our health care insurance, that we can see any doctor that we want, that premiums will fall and a host of other assertions from the White House and members of Congress and we see an ocean of promises floating away.

Assertions that health care is a “right” are simply incorrect. It’s not in the Constitution and it’s not someone’s “right” if I have to work to pay for it.

Finally, the preferences explicitly shown for trial lawyers and union members, “Obama Buddies,” were offensive. A sad showing indeed. This was not “government of the people, by the people,” but rather just a few people imposing their values on the rest of the people.

In order to remain financially solvent, the compensation that a firm can pay is limited to the revenue that a worker can add to the firm’s operation. In simple terms, a company cannot stay in business paying workers more than the revenue they generate for the firm. Compensation can then be divided between cash take-home pay and benefits and taxes. If you are worth $50,000 a year and have benefits and health care costs rise, it is hard to keep paying you the same take-home cash. This is the pressure that employers and employees face. But this bill does nothing to reduce costs by producing more efficient health care decisions. Instead, $500 billion in benefits have to be taken from the elderly while those who buy their own more expensive insurance must pay penalties. This is “rationing,” not “rationalizing” the health care market.

Bottom line, this legislation does nothing to make the health care system operate more efficiently, which is the “reform” that people wanted. Instead, it brings in millions of new “dependents,” those who will look to government for more handouts and vote for them (hang on for immigration reform, 12 million more votes). Furthermore, it manages to raise the health care bill for the country to be paid for by private-sector workers (unless you get a union “break”– stay tuned).

To be sure, many will like the “no pre-existing conditions” provisions and keeping “kids” (?) on the family policy until age 26 (guaranteed to raise health care costs). But these mandates, government definitions of “acceptable coverage” and the penalty structures are likely leading us to a single-payer, government-controlled health care system that will be rife with rationing. (How else, for starters, can we cut $500 billion out of Medicare?)

In the meantime, enjoy paying for the 16,000 new IRS “enforcers” out of your income. And here’s my confident forecast: there will be more taxes to come.

Taxing the Rich Didn’t Work for Clinton Either

Note from Jim:  Welcome to my good friend and guest blogger, Bill Dunkelberg.  You can find Bill’s bio and photo on the same web page that has my bio and photo.  From now on, note the blogger’s name under each blog’s title.  Thanks for reading!  Jim

Many commentators including a well known governor recently defended the proposal to tax rich people more by suggesting that Clinton’s tax hike resulted in budget surpluses and strong economic growth.  It doesn’t take an economist to recognize the absurdity of that statement.

Yes, taxes were raised on the rich by a Democratic Congress.  Then the Democrats were thrown out.  Fiscal conservatives gained control, which helped control spending.  The “politics” of the deficit were negative and the Congressional Budget Office predicted huge deficits through 2000.  But several events that are not likely to repeat in many lifetimes took over.  Most important was “Y2K”, a fear that anything with a chip would fail as the calendar clicked over to 2000.   This produced a huge surge in tech spending which was accompanied by a telecom boom (fiber optics etc.) that drove employment to a record high 64.5% of the adult population.  This had nothing to do with raising taxes on the rich, but since economic growth was so strong, tax revenues came in much stronger than anticipated and several years of budget surpluses occurred (if Congress knew the revenue was coming, it would have spent it!).

Unfortunately all of this came to an end in the last half of 2000 while Clinton was still president.  The budget surpluses would have occurred without the tax hike, but were probably larger because of it.  A major share of the surpluses was due to capital gains taxes in the best years, unfortunately not a tax on productive income generation.  It was just another big redistribution of wealth, for every winner, a loser with government taking a slice along the way.

So, unless the Democrats claim that they engineered the Y2K calendar event and the emergence of the internet (well, a few do take credit for this) and the telecom communications boom, it is time to recognize that the surpluses were a result of Schumpeterian investment shocks, not Clinton tax policy.  Stop these nonsensical claims and get back to the basics. It’s the private sector that creates wealth, not government and taxing working people will not enhance the recovery.