Monday, March 29, 2010

Public health is a bottomless money pit.

Public health officials and senior administrators who blame today's problems on a lack of funding should be immediately ridiculed and shouted down.

They've had their funding provided at every turn in the past decade, as Australia and many other Western nations have poured funding into their public health systems. The NHS in Britain should scare people much more than America's so-called "free market" health system.

Via Reason Magazine comes this terrific article:


It was the tragic case of 73-year-old Mavis Skeet, said the Tory-leaning Daily Telegraph, that "came to symbolize the crisis in the NHS" during the early Blair-Brown years. After having her cancer surgery cancelled five times—it was first scheduled for December 1998; it was cancelled a fifth time in January 2000—her condition was declared inoperable. She died in May 2000.

In January 2000, as the situation with the health service worsened, Blair appeared on David Frost’s morning program to declare that NHS spending was "too low" by European standards and a request a new infusion of cash to shore up the faltering system by adding doctors, nurses, and beds.

In a 2007 interview with the BBC (for the very good documentary "The Blair Years"), Blair acknowledged that around the time of Skeet’s death he was "receiving letters from people—heartbreaking letters—about people waiting for their heart operation, their husband or their relative, and dying on a waiting list because they couldn’t get treated quickly enough."

Friday, March 26, 2010

Socialised healthcare

I read somewhere that the health care bill was 2400 pages.

Why is it that the media report it as a universal health care package ? Wouldn't that just be a few pages of legislation ?

At 2400 pages, its the mother of all crap sandwiches. There is stuff in the bill forcing restaurant chains (with 20 or more outlets) to put calorie counts on their menus.

But focussing on one of the main points, the bill basically punishes Americans who don't purchase their own home insurance. Here are some lovely examples courtesy of Mike Shedlock's terrific blog:

Example 1:

Had a VERY INTERESTING conversation this evening with a CFO for a local business who employs about 100 people total..

I asked him how this health care bill was going to affect the company he works for.

He told me that he had run the numbers based upon providing health care for all of their employees and realized that he could save the company 1/2 million dollars by just paying the $2000 per employee penalty and not offering any coverage at all.

Example 2:

I ran the same simulation for the company I retired from. As a retiree, I continue to be in their group plan, at my own expense.

They can save $607,000 by terminating the health insurance plan, offset by a fine of $200,000.

One informed commenter sums up:

It is only after this bill is law for 5 or 10 years that we will begin to understand its effects. I believe they will be:

1. Costs far greater than anyone is the Government is letting us know. I challenge to name 3 government programs that cost what the government claimed they would. I can't think of one, except, I think I read, the prescription drug bill.

2. Like Mass. the costs will increase greatly on an annual basis.

3. The quality of medicine will drop drastically. Can you name me a single government program of this size that actually improves anything. Feds got into schools and they got worse, Feds got into energy and the situation is worse.

Wednesday, March 24, 2010

Deflation should be embraced, inflation should be rejected

The Angry Economist sums up much of the misguided fear that our economic and political "experts" have towards deflation.

Deflation is defined a decrease in the supply of money and results in falling prices. Each dollar has a stronger purchasing power. And just who wouldn't want this outcome ?

Well, our poorly schooled Keynesian economists warn that falling prices cause some kind of never ending deflationary spiral and a deficit in aggregate demand. Keynes asserted that people just won't spend anything under a scenario where all/most prices fell, and there would be pressure to cut wages as the outputs of industry fell in price. The so called spiral was as follows: Start->Inventories would grow, output would contract, employment would contract, incomes would fall -> Return to Start.

Keynes actually thought the laws of supply and demand didn't apply to labour like all it did with all other goods, and that wages could never adjust downwards to clear. So he blindly assumed unemployment would result and an economy would contract. When he suggested that this was the underlying cause of the business cycle and the great depression, the politicians swallowed every word of his.

This theory should have been flushed down the toilet in the face of reality. People always need to eat, they need clothing, work tools, housing, schooling and education. Not all purchases are speculative decisions. Sure, you'd think people might postpone many investment purchases if shares or property kept falling, but deflation isn't some never ending process. And real economic activity will continue despite the fall in speculative activity.

The kind of speculative activity that thrives under inflation - like the huge credit bubble that fueled the US property market till 2006, or the share market, or other asset bubbles across the world that occurred under inflation.

But returning to the fearmongering about deflation, The Angry Economist gives a great example of how misguided the arguments are:

The common wisdom is that deflation of the currency is bad. When money deflates, it becomes more valuable, even when you do nothing. So the theory is that people won't spend their money, because it will become ever-more valuable.

That theory cannot be true.

Look at the PC market over the last 30 years. In each one of those years, the PC became more reliable, faster, came with more memory and storage. The original MDA display was one color and text only. The CGA had 16 colors and 640x200 bits. The price -- of the computer you really want to have -- has stayed constant, at about $5000.

If the story told about deflation was true, then you would always be better off delaying your purchase of a PC by 6 months. You could be confident that the PC you would buy would be a more valuable PC.

Except ... that people did that very rarely, if ever. The standard advice was always "don't wait to buy a computer, because there will always be a better computer on the horizon."

So, in a situation where people can predict a constant stream of increase in value, people STILL made the trade. Thus, I think it's safe to predict that in a similar situation, where people could predict a constant increase in the value of their money, they would spend their money as needed.