Paul Krugman: Socialism Tastes Good - ala Mode

I usually will skip over the New York Times editorials but this one caught my eye. I wanted to read about why Paul Marx Krugman thinks Obama is the "anti-change candidate" but instead was treated to a warm piece of socialism ala mode.

"Mr. Obama who’s being unrealistic here, believing that the insurance and drug industries — which are, in large part, the cause of our health care problems — will be willing to play a constructive role in health reform. The fact is that there’s no way to reduce the gross wastefulness of our health system without also reducing the profits of the industries that generate the waste."

This is so crazy coming from an "economist". Profits are the problem? Profits cause waste? What economics theory produced such nonsense.

Reduced profits = less research and development

If a reduction in research is what the desired outcome is then using government to take away profits is probably a good idea. I'm going to assume that Krugman doesn't want that to happen. Using that assumption im not sure what he thinks is going to happen. Does he think that companies are going to make large quantities of high quality pills if there is no profit incentive? Interesting. Maybe he knows something that the economics field does not already know.

The real problem is collectivist health care systems around the world. Essentially, American health care consumers subsidize health care costs for the advanced nations. How? Because they cap prices and have collective bargaining schemes to drive down prices. Where do pharmaceutical companies make up the lost revenue? From us. That is one of the fundamental problems and it has no logical solution.

Taking away profits away from pharmaceutical companies will not improve health care quality any more than taking profits away from Intel will improve processor speed.

Little late on Health Care...

The state of the union speech is normally useless for political junkies. The speech is released to the press in sections which causes columnists write about it, reporters to report it, and pundits to pontificate on something that hasn’t happened. Axis of Evil proclamations not withstanding, the speech is very anti-climactic.

The predictable nature of the event makes it slightly more important than playing video games but definitely doesn’t rise to the occasion of a football game or The Office if they aired simultaneously. It rises above video games only because there is usually one golden nugget. This year’s golden nugget award goes to…tax deductions for personal health insurance.

While the details will change, the overriding theory is the best practical solution that has seriously been floated in a long time. As I have written about in the past, a major problem with health insurance is the lack of market forces. People do not shop for insurance.

States compel insurers to cover procedures that they deem necessary (in all their wisdom), and do not allow people to shop for policies in other states that may not have the same mandates. The lack of wiggle room creates a deficit of innovation and product diversity which results in higher prices. These higher prices make it unfeasible for either self employed or unemployed people to buy. They are instead encouraged to forgo the immense costs of insurance and use their money on something else. Hospitals are forced to threat the uninsured and recoup the difference by charging higher rates to paying customers. The higher prices cause insurance companies to charge more which causes employers to either charge more or drop coverage. It is a vicious cycle.

Promoters of universal health care recognize this problem also. The difference is that freedom fighters want the government’s hands off the private insurance industry while government lovers want to eradicate the private sector from the equation.

Bush has sided with the freedom fighters but, as the Wall Street Journal states, it is a little late. This would have been an easy win two years ago. The plan favors the poor (they will be able to deduct a set amount regardless of price), and frees employees from being controlled by their employer (or you can insert your favorite Marxist psychobabble here if you prefer) which are easy compromises for many Democrats.

This is the product of poor timing:

“Ways and Means Chairman Charlie Rangel was quick out of the box to call the President's idea "a dangerous policy that ultimately shifts cost and risk from employers to employees."

Schwarzenegger's Cuba

California is about to embark on reckless trip down regulation lane. Schwarzenegger thinks that by choking the free market to death he will create a health care utopia. I can see why he thinks this since it has worked so well in Cuba. In honor of his apparent hero he should don military garb and grow a beard, to accentuate his cigar smoking.

Schwarzenegger’s plan is to raise taxes on providers substantially, force consumers to buy an overpriced product that they may not want, and force insurers to sell their products to people who don’t qualify.

Will his plan insure more Californian’s? Yes. But, is insuring people by force a worth goal? I may be confused here but I thought the goal was to make health care more affordable and available. Schwarzenegger’s plan accomplishes neither goal. Californians will now be able to proclaim to their fellow man “I am unemployed, but by god I have insurance”.

Insurance is a product. People sometimes forget that everyone does not desire this product. A young, healthy worker may forgo coverage and instead use his saved earnings for other endeavors. Their savings can be used to provide a better life, and in time possibly become a more productive member of society as an entrepreneur. The minority is loosing their ability to make such choices because they must conform to the life that the majority, through government, thinks that they should live.

Unfortunately I don’t think there is anything that we can do about this in the short term. The people of California do not seem to care that the government is further consolidating their control of the health care market. Conversely it seems to be welcomed by the common man. The only fight now will be with the Democrats over the details. Our fight will be in the long term. In the not too distant future the economy of California will be suffering from an extremely inefficient bloated bureaucracy, over burdensome taxes, and a stagnant economy.

The goal must be to document and identify how Schwarzenegger’s plan goes wrong and be there to pick up the pieces when the people require change.

We must keep offering alternatives. David Henderson's article in the Wall Street Journal recommends opening up the market. He suggests that California drop mandates for insurance to cover many expensive and unnecessary treatments and allow people to shop for coverage in other states so they can find the cheapest policy that fits their needs. These simple common-sense solutions are the kind of incremental changes we must advocate.