Coercion here, coercion there, coercion everywhere

Special guest post -

By Craig J. Cantoni

April 2, 2010


In 1998, the Wall Street Journal published an op-ed of mine on the need to reform medical insurance/care and how to do it without resorting to coercion; that is, without federal law forcing citizens to do something against their will.

Of course, all laws are ultimately backed up by agents with guns. If that weren’t the case, people would ignore the laws.

The op-ed was part of a decade-long crusade of mine to not only reform medical insurance/care but to also awaken Republican leaders out of their stupor and warn them of the looming threat of incremental socialism, which, like its sibling ideology of fascism, depends on armies of armed agents for its existence. I failed miserably.

One reason for the failure is that Republicans like coercion as much as Democrats do, albeit for different reasons. Neither party wants to restrict the use of government force to its rightful purpose of enforcing contracts, regulating such negative externalities as pollution, and protecting life, liberty, property, and other individual rights.

Paradoxically, the people who hate guns are the people most in favor of medical care/insurance enforced with guns, as well as other social-welfare programs enforced with guns. Tellingly, the word “coercion” has never been used by the American media and intelligentsia to describe ObamaCare--or for that matter, any other form of collectivism and redistribution. After all, as with the Soviet and Nazi socialists, they believe that coercion is moral and just if done for the “common good,” as defined by them and not by the unwilling victims of their coercion. Why mention the means if the ends are good?

Now under ObamaCare, Americans are facing thousands of pages of coercive rules, 159 new coercive agencies and commissions, and thousands of coercive new IRS agents. As I detailed in my 1992 book on bureaucracy, propagation is the primary skill-set of bureaucrats. Using that skill-set, thousands of ObamaCare apparatchiks will quickly reproduce into tens of thousands.

As a result, Americans won’t be able to purchase medical care by simply walking into a doctor’s office and writing a check to the doctor in exchange for the doctor’s medical expertise, without first obeying the diktats of thousands of bureaucrats, who will be busily propagating behind their cubicle walls into tens of thousands of bureaucrats. Nor will Americans be allowed to purchase catastrophic medical insurance to cover what insurance is supposed to cover: catastrophes. They will have more freedom to get their car serviced without coercion than to get their bodies serviced without coercion.

The uninformed and misinformed who rely on the mainstream media for their misinformation and disinformation might say that most Americans don’t have the freedom now to pay for medical services without obeying the diktats of insurance companies and employers. What they don’t realize is that the Rube Goldberg contraption of the current system was created by decades of government distortions, diktats, and coercion. Like mold growing in your shower, distortions, diktats, and coercion always beget more distortions, diktats, and coercion.

It’s only a matter of time before the nation’s economic foundation collapses from the weight of the bureaucratic superstructure, as it has throughout history, including in Greece recently. In fact, the foundations are cracking throughout Europe.

But, shhh, don’t mention in polite society that the cause of the economic crack-up is coercion. You’ll be mischaracterized and demonized as a nut case who wants to overthrow the government. Then someday, Janet Napolitano will be at your door, and she won’t be carrying a fruit basket.


I’m certainly not going to mention it.

________________



Mr. Cantoni can be reached at ccan2@aol.com.

Coercion

Coerce:

Pronunciation: \kō-ˈərs\
Function: transitive verb
Inflected Form(s): co•erced; co•erc•ing
Etymology: Middle English cohercen, from Anglo-French *cohercer Latin coercēre, from co- + arcēre to shut up, enclose — more at ark

Date: 15th century

1 : to restrain or dominate by force
2 : to compel to an act or choice
3 : to achieve by force or threat

synonyms see force

— co•erc•ible \-ˈər-sə-bəl\ adjective

http://www.merriam-webster.com/dictionary/coerce


Your healthcare is now coerced by the state.

So it really doesn't save any money

Douglas Holtz-Eakin (ex-CBO director), writing in the NYT, takes the entire bill and Congress to task for employing gimmicks and unrealistic expectations (see previous post for suggested warning disclaimer for CBO scoring):

In reality, if you strip out all the gimmicks and budgetary games and rework the calculus, a wholly different picture emerges: The health care reform legislation would raise, not lower, federal deficits, by $562 billion.

More:

Another vivid example of how the legislation manipulates revenues is the provision to have corporations deposit $8 billion in higher estimated tax payments in 2014, thereby meeting fiscal targets for the first five years. But since the corporations’ actual taxes would be unchanged, the money would need to be refunded the next year. The net effect is simply to shift dollars from 2015 to 2014.

In addition to this accounting sleight of hand, the legislation would blithely rob Peter to pay Paul. For example, it would use $53 billion in anticipated higher Social Security taxes to offset health care spending. Social Security revenues are expected to rise as employers shift from paying for health insurance to paying higher wages. But if workers have higher wages, they will also qualify for increased Social Security benefits when they retire. So the extra money raised from payroll taxes is already spoken for. (Indeed, it is unlikely to be enough to keep Social Security solvent.) It cannot be used for lowering the deficit.

The Real Arithmetic of Health Care Reform

Alan Reynolds goes as far as calling parts of the bill outright fraud:

To be unduly optimistic (more so than the CBO), assume that the new entitlement schemes increased by only 7 percent a year. At that rate spending would double every ten years — to $432 billion a year in 2029, $864 billion a year in 2039, and more than $1.72 trillion in 2049.

Can anyone imagine that the new taxes and fines could possibly grow by 7 percent a year? On the contrary, most of the claimed revenues are either a timing fraud (treating $70 billion for long-term-care premiums as newly found treasure) or self-defeating. The hypothetical tax on Cadillac plans (suspiciously postponed until 2018), for example, is designed to discourage employers from offering such plans and employees from wanting them — that is, it’s designed to yield less and less over time.

Moreover, the accumulating penalties on reporting joint incomes above $250,000 — a 39.6 percent tax, a 3.8 percent income surtax, a 0.9 percent Medicare surtax, and rapid phasing-out of deductions and exemptions — would greatly discourage any activity that would push income above $250,000. Most obviously, no sensible family whose income is normally below that pain threshold would be so foolish as to sell enough assets to let capital gains push them over the line.

It’s Not a Health Bill

The net effect of this reform will be higher taxes and greatly reduced economic activity.

So it doesn't actually save money

It appears the CBO scoring of the current health care reform proposal doesn't actually save money:

Medicare fix would push health care into the red

Greg Mankiw gives a rundown of the economic effects of this reform, concluding

Indeed, to be very wonkish about it, these tax changes could have especially large [negative] GDP effects. Some people like to argue that taxes have small GDP effects because income and substitution effects offset each other. But if you give someone a subsidy and then phase it out, both the income and substitution effects work in the direction of reducing work effort.

A Warning about CBO Scoring

Michael Cannon states

If, however, the doc fix is actually part of the Obama plan, and that law would be subject to normal political forces plus the new political dynamics the law would create, then the CBO predicts the Obama plan would increase federal deficits by $59 billion over the next 10 years and maybe one-quarter percent of GDP in the subsequent decade.

CBO: ObamaCare Would Increase Deficits by $59 Billion

As we have been saying, this is a poorly constructed, expensive mistake.

How Not to Answer Health Care Reform Questions

Fox News’ revealing interview with President Obama yesterday contained many interesting exchanges, among them these two, towards the end of the healthcare portion of the interview.

Here, Bret Baier challenges the Democrat and Obama Administration assertion that the proposed legislation is deficit neutral:

BAIER: And you call this deficit neutral, but you also set aside the doctor fix, more than $200 billion. People look at this and say, how can it be deficit neutral?
OBAMA: But the — as you well know, the doctors problem, as you mentioned, the "doctors fix," is one that has been there four years now. That wasn't of our making, and that has nothing to do with my health care bill. If I was not proposing a health care bill, right — let's assume that I had never proposed health care.
BAIER: But you wanted to change Washington, Mr. President. And now you're doing it the same way.
OBAMA: Bret, let me finish my — my answers here. Now, if suddenly, you've got, over the last decade, a problem that's been built up. And the suggestion is somehow that, because that's not fixed within this bill, that that's a reason to vote against the bill, that doesn't make any sense. That's a problem that I inherited. That was a problem that should have been solved a long time ago. It's a problem that needs to be solved, but it's not created by my bill. And I don't think you would dispute that.

This logical fallacy, that a lack of a “doctors’ fix” for Medicare in this bill is not a reason – and the only reason – to vote against this bill (ergo, you should vote for it), is about a direct admission that Obama clearly has no answer to the charge that the cost savings touted here are bogus. Then, he reverts back to the “blame other people (George Bush)" strategy, which is a very weak strategy, and very unprofessional of this president.

As we discussed before (here and here and here), there are no cost savings with the proposed reforms, and costs will in fact increase, and care will be reduced, along with access.

And in summary here, Mr. Obama has only a weak quasi-moral defense of his proposed reform:

BAIER: Mr. President, I'm getting wrapped up, and I don't want to interrupt you, but to finish up, do you think this is going to pass?
OBAMA: I do. I'm confident it will pass. And the reason I'm confident that it's going to pass is because it's the right thing to do.

Not only is this proposed reform not the right thing to do, Obama is not the right person to decide whether it’s right or not. He is wholly, and completely unqualified to make such a determination, due to his lack of private sector experience, and the blatant violation of personal liberty which this bill constitutes.

Excuse me, Mr. President?

President Obama, was interviewed by Fox News yesterday.

OBAMA:

Bret, let me finish. If they don't, if they vote against, then they're going to be voting against health care reform and they're going to be voting in favor of the status quo.....

Excuse me? The vast majority of Americans understand that the status quo, as messed up as it is, is still much better than these "reforms". How dumb does the president think the American public is to consistently lie to them or to dictate what's best for people who are total strangers to him. Poll after poll shows the American people don't want this. Who does he think he is to effectively declare that he knows best?

The majority of Americans understand that this bill isn't about health care at all. It's purely an expansion of the Federal government into the deepest crevices of people's most private decisions, a huge tax increase, and a reduction of actual medical care in the United States. Previously, only fascist dictators carelessly shredded the constitution in pursuit of their preferred ends.

"...What the American people care about is the fact that their premiums are going up 25, 40, 60 percent, and I'm going to do something about it.

Yes we do care about that. However, two large reasons health insurance premiums increase so much is cost shifting from government-run Medicare and Medicaid (both of which denies more treatment than any private insurer) and to fund arbitrary government-imposed mandates. The bill Obama is pushing doesn't solve these problems. It greatly exacerbates them.

The only way to impose all the mandates the bill requires without increasing premiums is to extend meaningless coverage but deny actual treatment. How is that better?

BAIER:

Let me insert this. We asked our viewers to e-mail in suggested questions. More than 18,000 people took time to e-mail us questions. These are regular people from all over the country. Lee Johnson, from Spring Valley, California: "If the bill is so good for all of us, why all the intimidation, arm twisting, seedy deals, and parliamentary trickery necessary to pass a bill, when you have an overwhelming majority in both houses and the presidency?"

Good question. Obama never answered it.

I generally have a love/hate relationship with Fox, but this was a truly probing interview. Certainly a refreshing change from the usual fawning of other media outlets.

Personally, I'm disturbed how many people view this bill in light of one politician's personal political legacy and expect to extract great personal sacrifice for the glory of one man's ego? When did our roles switch and we became the servants of our public servants?

Let them know what you think.

Political Self Interest vs. Economic Self Interest

Here is a video clip comparing some of Reagan's and Obama's speeches with regard to socialized medicine and political vs. private power.

Begs the question the late Milton Friedman posed:

"Is it really true that political self interest is somehow nobler than economic self interest?"

This is what we must consider as the House is set to vote on the Senate's bill to hand over nearly 20% of our economy to the government. This segment of the economy happens to be a segment that affects each of us deeply - medical care. Obama claims that economic self interest is evil. Is political self interest better? Let your own and other representatives in the House know what you think. We provide a link on the top right hand side of the blog to a site where you can easily locate your rep.

Dan Mitchell of the Cato institute provides a brief explanation of the fiscal disaster that is "health care reform".

The video is only a few minutes long and well worth watching.

How much does this thing cost, III

Cato’s Michael Cannon, writing in National Review Online, does a deep dive on the true cost of Ms. Pelosi’s health care monstrosity:

The $1.5 Trillion Fraud

This is quite possibly the largest expense cover-up in national history, and appears to be an “inside job” – Democrats concealed the individual mandate cost, which helped defeat the Clinton proposal:

Rather than admit the individual mandate’s unpopularity and move on, congressional Democrats simply ensured that its costs would not appear in the federal budget this time around by gaming the CBO’s rule for what constitutes “federal revenues.”

Guess who worked his behind-the-scenes magic to enable this? You got it -

Obama budget director Peter Orszag laid the groundwork for this feat. While director of the CBO in 2007 and 2008, he fostered a more collaborative relationship between the CBO and members of Congress, which enabled the agency to provide behind-the-scenes guidance to Democrats crafting their mandate. That’s why the cost of the Democrats’ individual mandates appears nowhere in the half-dozen or more “preliminary cost estimates” the CBO has completed on various Democratic health-care bills.

So, it still costs “only” $1 trillion, right?

Nope:

So while the CBO estimates that the coverage expansions in the House Democrats’ legislation would trigger about $1 trillion of new federal spending over ten years, the actual cost of those coverage expansions is more like $2.5 trillion.

Thomas Sowell on the Empty Promises of Health Care Reform

In his latest column, Thomas Sowell explores the concept of price and cost with regard to medical care and the foolish, empty promises of politicians.

If we cannot afford to pay for doctors, hospitals and pharmaceutical drugs now, how can we afford to pay for doctors, hospitals and pharmaceutical drugs, in addition to a new federal bureaucracy to administer a government-run medical system?

and..

Economics and politics confront the same fundamental problem: What everyone wants adds up to more than there is. Market economies deal with this problem by confronting individuals with the costs of producing what they want, and letting those individuals make their own trade-offs when presented with prices that convey those costs. That leads to self-rationing, in the light of each individual's own circumstances and preferences.

Politics deals with the same problem by making promises that cannot be kept, or which can be kept only by creating other problems that cannot be acknowledged when the promises are made.

Why the public option will become mandatory

Michael Tanner at Cato has a critical piece about the outcome of health insurance under a so-called public option, Putting Private Insurance Out of Business.

Of note:

The lower cost means that businesses, in particular, would have every incentive to dump workers from their current health insurance plan into the government plan. And, if other provisions of the bill make insurance more expensive, as is likely, the incentive for employers to shift workers to the government plan would be even greater. Estimates suggest that nearly 90 million workers could eventually be forced into the government plan.

It is an economic misconception (or deliberate misrepresentation, depending on your level of skepticism) that introducing a “competing” public plan will somehow achieve lowered costs, but not drive out private providers.

Government-run programs are not subject to regular economic forces, and do not have the same operating constraints borne by private sector enterprises, allowing them to do exactly as Mr. Tanner suggests. To believe otherwise is to live in economic fantasyland.

How much does this thing cost, II

The CBO estimate For HR 3962 is out, and it says $1.055 trillion:

CBO Puts House Health Bill Total Cost At $1.055 Trillion

By Martin Vaughan, Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- The Congressional Budget Office said Thursday a U.S. House health-care system re-write would extend health insurance to 96% of the nonelderly U.S. population by 2019, and spend $1.055 trillion to do so.

Penalties imposed on individuals who did not purchase insurance, and employers who did not offer coverage to their workers, would raise $161 billion over that time-frame. That brings the net cost of the bill to $894 billion through 2019, CBO said.

House Democrats have seized on that net cost figure to claim that their bill is below President Barack Obama's upper limit which he set for health-care legislation of $900 billion.

The $1.055 trillion estimate also does not include $245 billion needed to stop Medicare payments to doctors from decreasing, which the House plans to address through separate legislation introduced Thursday.

...

More here: CBO Puts House Health Bill Total Cost At $1.055 Trillion

How much does this thing cost?

The House version of the health care reform bill has gone well above President Obama’s target of $900 billion:

House health care bill exceeds $1 trillion

By DAVID ESPO (AP) –

WASHINGTON — Health care legislation taking shape in the House carries a price tag of at least $1 trillion over a decade, significantly higher than the target President Barack Obama has set, congressional officials said Friday as they struggled to finish work on the measure for a vote early next month.

Democrats have touted an unreleased Congressional Budget Office estimate of $871 billion in recent days, a total that numerous officials acknowledge understates its true cost by $150 billion or more. That figure excludes several items designed to improve benefits for Medicare and Medicaid recipients and providers, as well as public health programs and more, they added.
...

And let’s not forget the stellar track record of government cost predictions.

Ranking US Health Care II

Health Insurance Co. profitability, via Mark Perry at Carpe Diem,

Health Insurance Companies Rank #86 By Industry Profit Margin, Earning $98 on Average Per Policy

[h/t Coyote]

Update: From Calvin Woodward (AP) -

…
Health insurance profit margins typically run about 6 percent, give or take a point or two. That's anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.

Profits barely exceeded 2 percent of revenues in the latest annual measure. This partly explains why the credit ratings of some of the largest insurers were downgraded to negative from stable heading into this year, as investors were warned of a stagnant if not shrinking market for private plans.
…

See: FACT CHECK: Health insurer profits not so fat

Ranking US Health Care

One of the “statistics” cited by critics of US health care is the number 37, assigned by the World Health Organization.

As Carl Biailk (WSJ) observed,

Among all the numbers bandied about in the health-care debate, this ranking stands out as particularly misleading. It is based on a report released nearly a decade ago by the World Health Organization and relies on statistics that are even older and incomplete.

No single ranking can capture the complexity of the US health care system, and this ranking appears to be particularly poor in evaluating actual performance.

See Ill-Conceived Ranking Makes for Unhealthy Debate

About to Get Very Ugly

On Wednesday, Democrats blocked S. 1776, designed to fix the Medicare physician payment formula. In doing so, they may have gained a mortal enemy in the AMA.

To this point, the AMA was cautiously optimistic about reform possibilities. This seems to have evaporated:

Congress created the Medicare physician payment system, and Congress needs to fix this problem once and for all to fulfill its obligation to seniors, baby boomers and military families. Permanent repeal of the Medicare physician payment formula is essential to comprehensive health system reform.

[AMA deeply disappointed Senate has failed seniors, baby boomers and military families by blocking S. 1776]

Coupled with last week’s health insurance industry shot across the bow, this can only mean a very noisy Senate-House ObamaCare legislation merger, and even more contentious full body approval.

If this legislation moves forward, Congressional Democrats are about to learn a very costly lesson: once the groups you invited to dinner discover they’re actually on the menu, nobody sticks around very long, including and especially your voting constituents, who are directly affected by this legislation. That's most of America.

Severe Economic Dishonesty

Now that we’re back in high season for health care reform debate, here’s another example of politicians blatantly ignoring the truth, and their own past statements. This example is exceptionally disturbing, given the size of the economic impact this reform will have, along with universal personal effects, not just protected groups or special interests.

The Baucus Bill, as it has become known, is being touted by the Obama Administration as "deficit neutral," and even more aggressively as reducing the overall deficit. This is a bald-faced lie.

Peter Orszag, current Office of Management & Budget (OMB) Director, has put his stamp of approval (unsurprisingly) on the Baucus Senate proposal, going as far as calling it "fiscally responsible," in response to a CBO finding last week that would supposedly reduce $81 billion from the deficit over 10 years.

It isn’t, and it won't, and he knows it. Mr. Orszag's previous job was head of CBO (Congressional Budget Office), where he stated in 2008 that "The federal budget is on an unsustainable path." This was before the financial meltdown, and largest post-WWII incremental deficit spending stimulus, much less a multi-trillion dollar additional entitlement.

Devilish detail: CBO is forced to score legislation given static projections, which are almost universally false, and refrain from ruling on the overall economic veracity of those projections. As Gene Epstein notes in last Monday's Barron's,

The problem, [Douglas] Holtz-Eakin [also ex-CBO director] explained, is that when it comes to "scoring" a specific piece of proposed legislation, the CBO's hands are tied. It cannot use its discretion to question the plausibility of a proposed bill. It must, therefore, "accurately assess the legislative fantasy presented to it."

Basically, the projections are a joke.

Further, in 2008 Mr. Orszag (see above) apparently thought that Medicare physician reimbursement would increase, but now mysteriously believes the opposite, which drives the "deficit reduction" numbers conclusion:

But a big component of the new bill was that physician payment rates under Medicare continue to be cut, one of the very things CBO director Orszag had specifically dismissed as unlikely. So OMB director Orszag might have explained, in the interests of fiscal responsibility, why he had changed his mind.

Taxes must and will go up as a result of Baucus, and there will still be major dislocations and deficits as a result of the "revised" proposal. The representation of this proposed legislation to date has been excessively economically dishonest.

It would be most helpful if the media would actually do their jobs and report this.


Kudos to Gene Epstein - CBO to OMB: A Tangled Tale (Barron's, subscription required)

See also: The Baucus Bill Is a Tax Bill (Douglas Holtz-Eakin, WSJ)

Danger Will Robinson! Economic Danger!

ObamaCare is a looming economic disaster.

It will pile on to the largest post-WWII deficit stimulus in US economic history, creating huge additional tax disincentives to start businesses, and crowding out productive private investment.

Incentives are the gravitational force of economics. Removing incentives stalls economic growth, most often via taxes. Obama’s idea to fund his plan fails miserably, and taxes the largest economic producers:

The House bill proposes to raise the highest personal income tax rate by 5.4 percentage points. This is on top of the Obama administration's plan to raise the top rate by another 4.6 percentage points next year. The combined 10-percentage-point increase raises the top income tax rate to 45%—an economic growth-destroying level not seen since the early 1980s. Sen. Max Baucus (D., Mont.) proposes, instead, to tax some health insurance premiums.

In neither bill do higher taxes finance the proposed additional spending. Should the Medicare savings fail to materialize, as we* believe they will, the spending in either bill will add more than $100 billion per year in perpetuity to the already soaring national debt. [my emphasis – Pub.]

*John F. Cogan, R. Glenn Hubbard, and Daniel Kessler, Doubling Down on a Flawed Insurance Model, WSJ, 9/25/09

Notably, these new taxes start in 2010, a really stupid idea when we're still in an economic recovery, but health insurance full-coverage doesn't begin until 2013, comfortably after the 2012 election. Also note the indefinite expiration “in perpetuity” cost. That's not funded, either.

Barack's economic timing could not be worse: leftover misguided Depression-era, unfunded social welfare programs like Social Security, Medicare and Medicaid are about to step on the baby - boomer demographic landmine, effectively bankrupting them before the inevitable temporary ineffective politically expedient non-fix "fix."

Somehow, President Obama thinks adding to the problem will solve it.

He’ll make it far worse.

When is a Tax Not a Tax?

When is a tax not a tax?

Apparently, when President Obama says so.

On the Sunday shows this weekend, Mr. Obama continued his sale of health reform. Among his comments on ABC’s “This Week” program was the statement “For us to say you’ve got to take responsibility to get health insurance is absolutely not a tax increase.”

George Stephanopoulos, to his credit, pressed Mr. Obama on this, looking up the definition of tax in the Merriam-Webster dictionary.

[full exchange available here.]

President Obama seems confused by this health care tax increase, because those who would be required to purchase insurance would receive some benefit in return. But The Wall Street Journal observed, “what doesn't count as a nontax under Mr. Obama's definition? All taxes can be justified in the name of providing some type of service, however wasteful.”

[Obama’s Nontax Tax, WSJ, 9/21/09]

As we (and many others) previously remarked, requiring people to spend their money is absolutely a tax. And because many of the affected people currently pay $0, choosing not to carry health insurance, it is an increase. So if the reform proposal backed by Mr. Obama passes, including mandatory coverage, it will be a tax increase.

Farewell, Free Speech

The debate over health care has taken a frightening new turn. David Henderson of EconLog blogs about the HHS threatening Humana and demanding it stop mailer because its information runs counter to the current administration's narrative on health care reform.

One of the ways that governments try to "win" debates is to make debate by the other side illegal. This is what HHS is doing, at the behest of Senator Baucus.

The HHS threatened to take action against Humana if it didn't stop sending out its mailer.

For years, various commentators have said that Friedrich Hayek, in The Road to Serfdom, and Milton Friedman, in Capitalism and Freedom, exaggerated the dangers to freedom of speech from government control. But also for years, drug companies have feared criticizing the FDA because the FDA has so much discretionary control over their economic livelihoods. Now HHS has upped the ante. Will the defenders of freedom of speech step up to defend Humana's rights, as opposed to Humana's statements. How many people will there be who disagree with what Humana said, but who defend (I don't even need "to the death"--I'll settle for a letter and postage stamp) their right to say it?

When we allow the government to exercise its might to strip us of our basic right to speech, to stifle opposition at its whim, then we are in deep trouble. Then, we are on the road from freedom to tyranny. To serfdom.