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Generational Dynamics Web Log for 25-Jul-2009
Obama's health plan, a proposal of economic insanity, appears to be losing support

Web Log - July, 2009

Obama's health plan, a proposal of economic insanity, appears to be losing support

The tv drama, "The education of Barack Obama," continues.

Last week, President Obama was forced to delay by six months the creation of a plan on closing Guantánamo prison.

And now a rift among Democrats in Congress has forced President Obama to accept a delay in his health plan legislation until much later in the year than he had hoped. Even worse, public opposition to the plan is growing, and Obama's poll ratings have been falling.

It seemed so easy when Obama was campaigning last year. He would be guided by facts, not like President Bush, who was guided by ideology and ignored facts. The world would change on January 21. He would cure global warming, close Guantanamo, become friendly with Iran and North Korea, bring a two-state solution to Palestinians and Israelis, beat the Taliban in Afghanistan, reflate the stock market bubble and, of course, provide universal health care.

The youthful President Obama is learning that there are more and more facts to be guided by, facts that he apparently wasn't aware of. The education of President Obama continues, with exciting new episodes every day.

In the case of his health plan, we can only be thankful that it appears to be going nowhere, since it's an economic disaster. If Obama ever manages to use his overwhelming party majorities in both branches of Congress to push something through, it will be a mess.

Price controls

Politicians say that our health system is "broken," and perhaps it is. Politicians say that health-related costs have been rising faster than inflation, and they say that some people (the poor, the unemployed, the minorities, the sick, etc.) don't have health insurance.

In other words, the worst of what the politicians say is wrong with our health care system may well be true, but the insanity is believing that you can just pass a law and the problems will be solved. As bad as things are now, passing a 1,000 page law will make things much, much worse.

If prices are going up faster than inflation, it means that the law of supply and demand is pushing prices up. And if some people don't have health insurance, it means that rationing is going on. This isn't too difficult to understand -- unless, of course, you're a politician, to whom simple economics is as difficult as rocket science.

President Obama's health care plan amounts to price controls and rationing. This is a recipe for total disaster.


Inflation rate following the imposition of wage-price controls on August 15, 1971 <font size=-2>(Source: econreview.com)</font>
Inflation rate following the imposition of wage-price controls on August 15, 1971 (Source: econreview.com)

I've lived through price controls before. On August 15, 1971, President Richard Nixon imposed national wage-price controls by executive order. It was an unmitigated catastrophe.

There were many little mini-catastrophes, but the one that's always stuck in my mind was that farmers in New Jersey were drowning chickens. The problem was that chicken feed was a commodity whose price was determined by the international commodities markets, and so its price could not be controlled, while the prices of chickens WERE controlled. So the prices of chicken feed went up, and the prices of chickens stayed the same, meaning that farmers could no longer afford to raise chickens. So they drowned the chickens, leading to a big shortage of chickens.

Another thing that I remember was that wage-price controls applied to private industry, but not to government agencies. Thus, books and pamphlets sold by private publishers were price-controlled, but books and pamphets sold by the Government Printing Office were not. Thus, you had to pay huge prices for federal government publications, while many publications from private publishers simply became unavailable.

President Nixon's wage-price controls were the worst kind of Rube Goldberg contraption. You had different government agencies involved, keeping track of prices, making sure no one was cheating, and reviewing requests to raise prices if someone could defend it as an "emergency." As you can see from the inflation graph above, it didn't control prices at all. All it did was distort the markets so much that ordinary market efficiencies broke down. Without the market efficiencies, inflation got astronomically worse, before the entire disastrous program was finally abandoned in 1974.

A Rube Goldberg contraption

You cannot defeat the Law of Supply and Demand by passing a law. Only a politician or economist is stupid enough to believe you can.

Apparently few people have even read the 1000+ page proposed law that's supposed to solve all our health care problems, and apparently no one, even its sponsors, has any real idea how it's supposed to work. This isn't surprising, since the problem that it's intended to solve cannot be solved without making the problem worse than it is already.


Health care plan diagram from Republican opposition <font size=-2>(Source: house.gov)</font>
Health care plan diagram from Republican opposition (Source: house.gov)

The Republican opposition have put together this "organizational chart" of the health care plan. (Click here for a full-sized chart on the House web site.)

I don't know whether this diagram is correct in detail, but in concept it's very close to what's going on, because there's no way to administer a price control and rationing scheme this complex without numerous government agencies.

Apparently the Democrats agree, because they've been using procedural methods to block Republicans from sending the chart to their constituents.

If President Obama manages to push anything like this contraption through Congress, you can expect things like the following to happen, analogous to President Nixon's disastrous wage-price controls:

This is yet one more example, as if more are needed, of the results of the lethal combination of greedy, nihilistic Gen-Xers, combined with greedy, stupid Boomers. No one capable of thought can possibly believe that this health care plan will work. This leaves us with the obvious conclusion that nihilistic Democratic Gen-Xers are pushing this plan because they expect to get votes or make money from it, and don't care how destructive it is, and stupid Democratic Boomers are going along with it for the same reason.

As I keep emphasizing, the same people who perpetrated the massive fraud leading to the current financial crisis are still in charge, in the Obama administration, in Congress, in financial institutions, in health care organizations, and in other organizations. Nothing has changed, except the nature of scams, and this has the potential to be an even worse scam than selling fraudulent mortgage-backed securities.

There is one big advantage that we have today that we didn't have in 1971. President Nixon's wage-price controls were wildly popular when they were imposed, and so there was little political opposition to them until the disaster became apparent. Today, the health care plan is becoming increasingly unpopular BEFORE its imposition, so if we're all lucky, the effort will collapse completely.

Incidentally, rationing problems are not unique to the United States. The Law of Supply and Demand has forced rationing on Canada, the UK, China, and other countries that have public health plans. That's why we always have news stories about people from these countries coming to the US to get immediate health care that they'd otherwise have to wait months for. Any price control and rationing scheme will always permit exceptions for the élite -- wealthy people, politicians and their cronies. The rest of us will always have to suffer.

The future of health care

So what's going to happen to health care? It's a fair question, given the very real problems of existing rationing and increases in health care costs.

The answer is that the market will take care of it in ways that can barely be foreseen today.

I believe that within ten years or so we'll have computerized health care that will reduce costs dramatically. The reason that health care is so expensive is because it's so people-intensive, and nurses and doctors are very expensive. These costs will come down dramatically.

First, in the short run, as we go deeper into a new Great Depression, the salaries of nurses and doctors will be pushed down substantially, making health care and health insurance more affordable. There will be a new mood of parsimony, and this should reduce many auxiliary costs, including the huge awards to malpractice lawyers.

Second, in the longer run, many duties that today are performed only by doctors and nurses will increasingly be performed by computers. This doesn't mean that there won't be a human doctors and nurses; but it does mean that many of the repetitious functions of doctors and nurses will be performed by intelligent robots.

As I wrote in "I, Robot is science fiction, but intelligent computers will soon be science fact," we're in a world where computers are rapidly becoming as intelligent as human beings are, and are able to make decisions that are as intelligent as (or even more intelligent than) a human being can.

We already have some primitive forms of this. In a hospital room today, there are computerized devices that continuously monitor heartbeat and blood pressure and notify nurses if there's a problem. And there are people walking around with implanted devices that keep the heart beating and wirelessly notify doctors of sudden emergencies.

I'm imagining the following: A robot that can take care of a sick person in the home or hospital. It can monitor the patient 24 hours per day, take your temperature, dispense pills, give shots and provide meals. More sophisticated versions will even be able to clip toenails. It will have computer vision and hearing, and will be able to respond to simple patient requests like, "Please bring me a glass of water." If something happens that it can't handle, it will wirelessly call for a real live human nurse or doctor.

This will be technologically possible within ten years or so, and will be the key to reducing health care costs, and will happen whether or not any health care bill passes. All a health care bill can do now is make things disastrously worse in the meantime.

(Comments: For reader comments, questions and discussion, see the President Barack Obama thread of the Generational Dynamics forum.) (25-Jul-2009) Permanent Link
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