We are, the pundits tell us, staring down the barrel of an economic catastrophe. By this time next week, we may all be huddled in our darkened hovels, breaking up furniture for our meager fires, roasting the family dog for our sustenance, and dreading the likely invasion by the great Canadian menace.*
*By cutting government spending and not raising taxes, the Canadians have not only turned a deep recession into an economic boom, but have set an embarrassing example which our leaders in Washington and our press have taken great pains not to notice. The Canadians indeed are a menace.
But fear not. DrRich is here to assure his readers that, despite what you’ve been told, this isn’t Armageddon. He offers three proofs for this assurance.
First, the debt limit is a meaningless fiction.
The term debt “limit” implies that there is some limit to the amount of borrowing which we can do; that we may borrow money up to a certain and well-defined point, and no further. But history tells us this is absurd.
Each and every time we decide we’d like to spend more money than the debt limit says we can spend, we simply increase the debt limit. We have blithely blown past dozens of supposed debt limits in recent years, with nary a glance behind us.
DrRich is not sure why we have a debt limit at all. At some point, he supposes, somebody determined that publishing a debt limit would convince people (which people? the voters? the credit-rating agencies? the Chinese?) that we actually have some sort of built-in controls to our fiscal profligacy. But surely, after decades of treating our debt limits with less regard than one would treat speed bumps during a police chase, nobody can actually believe that we would honor those limits, ever, under any circumstances. It is obvious that the only thing debt limits can accomplish is to create transient, artificial fiscal crises, like the one we are all enjoying now.
The only logical solution to our current crisis is to simply eliminate debt limits once and for all. We would not be giving up anything substantial, since no debt limit has ever been honored nor ever will be. Debt limits clearly do no good; they only cause trouble.
So DrRich offers this solution, this change we can all believe in: Eliminate the debt limit altogether.
No problem which has such a simple and happy solution can be Armageddon.
The second reason this is not Armageddon is: One cannot schedule Armageddon.
The current debt ceiling, the one we’re going to exceed on Tuesday, is $14.3 trillion. The President wants it increased by another $2 trillion or so, enough to delay the next debt ceiling crisis until after his re-election. This, of course, is understandable. The Republicans, it appears, would like to increase the debt limit by a lesser amount, so that the next crisis will occur at a time more to their convenience. This is also politically logical.
The point here is that, by simple manipulation of the value of the meaningless fiction known as the debt limit, we have full control over scheduling the next debt crisis which will threaten our markets, economy, &c.
A feature of Armageddon upon which everyone can agree is that it cannot be scheduled. Therefore, this is not Armageddon.
The third reason this is not Armageddon is: The amounts of money we’re talking about are too trivial.
Everyone is arguing over the questions of whether we ought to leave the debt limit at $14 trllion, or increase it by another $2 trllion or so, and whether we ought to cut spending and/or raise taxes by a mere $100 billion a year or so. And the results of these arguments, we are told, will determine whether or not, in a few days, the skies will split asunder and the seas will boil away, and Old Farts like DrRich, suddenly bereft of our God-given entitlements, will immediately be reduced to dining on cockroach-kabobs toasted over a smouldering dung fire.
But worrying so much about increasing our debt by another $2 trillion (an amount so massive, so huge, as to be unimaginable to mere mortals) is akin to worrying about having another smoke as one lies dying of lung cancer – it sure won’t help, but either way, the outcome is the same.
Our debt limit, as huge and unmanageable as it is, is not only a fictional construct, but it serves as a soothing distraction from our real fiscal problem – the one that really does promise Armageddon.
Our unfunded liabilities, over the next few decades, for the things our society has promised and is obligated by law to shell out for us Old Farts – things like Social Security and Medicare – is at least $62 trillion, and some have projected double that amount. Now, there’s a real problem.
We can’t talk about that, though. If a politician proposes the first, meager step towards finding a solution to that, they will show up in a TV ad pushing sweet old ladies off a cliff.
In any case, we are not facing Armageddon next week.
That’s for later.
While all the Republicans and Democrats in Washington are spending all these fine summer weekends fighting over the debt ceiling, and so far have absolutely nothing to show for it, the smart people at the New York Times have gone ahead and solved the whole debt problem for us.
Blaring at us from the front page of today’s Sunday Review, in huge, bright red print, we see the following chain of logic: A 20% tax on soft drinks will produce a 20% reduction in consumption, which will prevent 1.5 million people from becoming obese, which will prevent 400,000 cases of diabetes – yielding $30 billion in health savings.
This revelation leaves DrRich slapping his forehead and wondering, “Why didn’t I think of that?” Simply use the tax code and the regulatory muscle of the Central Authority to change human behavior in the proper manner, and everything will fall into place.
It takes a special kind of person to believe that human behavior is so predictable, and so controllable, that one can actually titrate in such a manner the amount of obesity that exists in a society, and therefore, titrate the cost of healthcare. It takes a special kind of person to believe that, simply by tweaking a specific tax here, or adding a specific regulation there, one’s actions will yield precisely the response predicted by the “experts,” and that this response will translate precisely down a complex chain of assumptions (based on selective analysis, conjecture and wishful thinking) to yield cost savings anything similar to those predicted, and that the cascade of results (not being subject to any vagaries of human nature) will not have all manner of unintended consequences. That special kind of person is called a Progressive.
Let’s say that some really smart operative in the Obama administration, reading today’s Times, takes it into his head to solve the obesity crisis, the healthcare crisis, and the debt crisis all in one brilliant stroke, and accordingly, gets the President to appoint the entire New York Times Editorial Staff as the country’s new Czar of Food. These fine folks, sensing a once in a lifetime opportunity and not wanting to squander it on such small potatoes as a softdrink tax, decide to go all out. They institute large, prohibitive taxes on ALL the foods consumed by our society that contribute to our obesity. As a result, the only foodstuffs that remain untaxed are fresh fruits, vegetables, and fish. (And, considering the possibility that one or more of the NYT editorial staffers may very well be vegans, DrRich is not sure about the fish.)
According to the Times’ variety of calculus, this action will have remarkably positive consequences. The consumption of unhealthy, obesity-producing foods will drop by some very large amount – probably 90% if the taxes are high enough – and American obesity will nearly disappear. Diabetes will go the way of tuberculosis and leprosy, all the other medical disorders made worse by obesity will greatly diminish, and we will save trillions of dollars in healthcare expenditures.
What would actually happen, of course, is quite different.
If all sugary foods and fatty foods and processed foods were heavily taxed, the demand on the untaxed foods (the fruits, vegetables and fish) would skyrocket, and prices would go through the roof. Only the very wealthy could get all the healthy food they wanted. The merely wealthy would get some of the healthy food, and would supplement their diets with the unhealthy stuff, grudgingly paying the excessive taxes to do so. DrRich does not know what the poor would do for food, but he bets they would be pissed.
A lot of other unpleasant things would happen as well. The companies that process foods and soft drinks – and most American restaurants – would suffer badly, and would probably go out of business. Robust black markets would establish themselves, trafficking in inexpensive, calorie-dense (and possibly even tasty) foodstuffs, which would now be produced in Mexico, Canada and China instead of in the US. Junk food cartels would murder each other along our borders. Americans would find themselves envying, rather than pitying, that occasional old fart who is discovered dining on a can of Fancy Feast Cat Food.
And furthermore, Americans will learn something about one’s ideal body weight that we don’t hear too much about today, because it does not fit into the “overweight is bad” narrative. Namely, while severe obesity is very bad for your health, being a little overweight is probably not so bad. Statistically speaking, it is more threatening to one’s longevity to be too thin than to be a little overweight.
DrRich does not have the solution to the obesity problem we have in America. If there is a solution, DrRich thinks it is likely to be some combination of science (since there is a large genetic component to true obesity), encouraging a sense of personal responsibility for living one’s own life, and yes, even public policy. But he finds the kind of linear thinking displayed in today’s Times – relying on assumption piled upon assumption, ignoring the obvious human and economic reactions that will knock those assumptions off their straight-line path – to be silly. And if they actually encourage public policy experts to behave in such a manner, they can be dangerous.
David Brooks last week penned a remarkable opinion piece for the New York Times suggesting that the root problem underlying our unsupportable national debt is the unreasonable desire of Americans to be cured of their illnesses. DrRich finds this an interesting formulation of the problem.
As DrRich has said many times, it is indeed true that our rising cost of healthcare is the chief driver of our national debt, and therefore is the chief threat to our long-term survival as a civil society. But while DrRich and others have proposed solutions to this problem that would rely on new systems for paying for America’s healthcare, Mr. Brooks’ problem statement admits no such solution.
For Mr. Brooks, since the root problem is the unreasonable attitude Americans have toward disease and death, the only solution must be for Americans to change their attitude*.
*The need to change the attitude of the masses – or to say it another way, the need to change human nature – always turns out to be the fatal flaw of the Progressive program.
Brooks opens his piece with a paen to Dudley Clendinen, a former colleague at the Times, who is suffering from ALS (Lou Gehrig’s disease). Clendinen’s recent article in the Times Sunday Review revealed his plan to commit suicide before allowing himself to become completely incapacitated by his illness.
DrRich suspects that many of his readers will, as he does himself, understand, respect, and even support Mr. Clendinen’s plan. But understanding, respecting and supporting his plan to commit suicide is different from saying that Mr. Clendinen’s decision is so reasonable that, really, everyone ought to reach the same conclusion, and anyone in his position who does not is somehow being unreasonable (or worse).
But this is exactly what Mr. Brooks is saying. Specifically, Brooks says, “But it is hard to see us reducing health care inflation seriously unless people and their families are willing to do what Clendinen is doing — confront death and their obligations to the living.” In other words, Clendinen is doing no more than his rightful duty. He does not deserve praise as much as people who choose otherwise deserve criticism.
This is not Mr. Brooks’ only message. His other message is that medical progress is an illusion. He points out that the War on Cancer, announced in the early 1970s, has still not been won, and that despite all the research we have done, heart disease has still not been cured. He quotes some famous medical ethicists (DrRich’s favorite people, save the public health experts) as saying “our main achievements today consist of devising ways to marginally extend the lives of the very sick.”
DrRich will not argue that all of our investment in medical progress has been stunningly successful. He will simply remind his readers that neither has it all been futile. Hundreds of thousands of cancer survivors are leading happy lives today who would have been dead from their disease in 1970. And while the mortality rate from heart attacks approached 20% in 1970, today (in the U.S at least) it is around 2%. So while we haven’t cured all cancer or all heart disease, our efforts have still improved and extended the lives of a lot of people.
Mr.Brooks, who passes at the New York Times as a “conservative,” is pretty cozy with the Obama administration. And while DrRich would not suggest that his message to us is directly coordinated with the Obama folks, it is likely that it expresses certain beliefs which the administration, at the least, would not find objectionable.
DrRich has long attempted to convince his readers that the Progressive program is very sympathetic to efforts to stifle medical progress, and to hasten the end of life.
Mr. Brooks’ latest effort is a sign that Progressives may be finally beginning to come out of the closet, to stop beating around the bush – and to openly state their actual healthcare agenda. If so, DrRich praises his honesty and forthrightness.
As an aid to Mr. Brooks and his friends, DrRich has produced a very helpful and very detailed roadmap for how to sell assisted suicide to the masses.
Everyone agrees that national spending on healthcare is on a trajectory to bankrupt America during the lifetimes of even Old Farts like DrRich. And therefore, most folks* agree that we ought to do something to reduce our national spending on healthcare.
*The reason it’s only “most folks” who agree is that, apparently, some folks are still partial to the Cloward-Piven strategy, and continuing to spend on healthcare as we are doing today is the quickest and surest way to get there.
Unfortunately, our national “discussion” on how to achieve this reduction in healthcare spending has devolved into a spectacle of accusations and counter-accusations, vituperation, abuse, and scurrility. Accordingly, not much useful has so far been achieved. Worse, the back-and-forth contumelies lobbed by the various interest groups in this national discussion have created a general sense among the public that the problem is so confused and chaotic, so rifled by conflicts of interest, and so very complex, as to be fundamentally unsolvable.
This general sense of despair is entirely unnecessary. DrRich is here to assure his readers that the problem of healthcare spending is not only solvable, but that it is destined to be solved – and within the lifetimes of many of us.
Furthermore, there are four ways (and only four ways) in which this inevitable reduction in healthcare spending can be achieved. By knowing these four methods of solving the problem, it is entirely possible – as we listen to all the debating, fighting, and reciprocal castigations, aspersions, distortions and lies being cast by and amongst the various interest groups – to understand which method is actually being espoused by which parties. If you happen to be partial to one method over another, this kind of knowledge can help you determine to whom you should offer your support.
And so, in the way of providing yet another remarkable service to his readers, DrRich is pleased to describe the four ways to reduce healthcare spending.
Method One: Make all healthcare spending the responsibility of the individual.
This is the method by which most of mankind has paid for healthcare for all but a few decades of the millions of years we have graced (or plagued) the planet: If you want or need healthcare (and if it exists), simply pay for it yourself. Proponents of this method offer two general arguments to support their position – an ethical one, and a practical one.
It is fundamentally unethical to insist that an individual’s healthcare services must be provided by others – claiming that healthcare is somehow intrinsically different from any other product or service which the individual may wish to acquire (such as food, clothing, housing, and iPADs) – because insisting on such a thing will place an unjustifiable burden on one’s fellows. Much of a person’s health (and therefore, of a person’s healthcare needs) is determined by lifestyle choices, so it is only right and proper for the individual to bear responsibility for those choices. Demanding that one’s fellow citizens take that responsibility for such personal choices is fundamentally unethical – and requiring them to do so will inevitably lead to tyranny by some Central Authority.
Method One also holds that, by returning the purchase of healthcare back into the realm of actual market forces, the laws of supply and demand will determine which services are actually needed, and what the rightful price for those services ought to be. So from a practical standpoint, Method One will at last recruit the efficiencies of the marketplace into the healthcare system, and bring the cost of healthcare services down to a level which individuals can actually afford. (And if people can’t or don’t want to pay for healthcare services, they are more likely to begin making lifestyle choices that will lower their odds of having to do so.) But whether or not individuals can afford medical services, at least the spending on those services will no longer be the burden of society – and the fiscal doom we now face will be cured.
Opponents of Method One point out that, inevitably, there will be individuals – and likely many, many individuals – who simply will not be able to afford to pay for healthcare services which are needed, and which are readily available for a price, and will therefore suffer preventable pain, disability, and death. Without some kind of public support for healthcare, heart-rending tragedies will abound, our civilization will become coarsened, anger will build, and insurrection will become a constant threat.
Method Two: Make all healthcare spending the responsibility of a Central Authority.
Method Two holds that, for straightforward ethical reasons, healthcare is a fundamental right; that whether one receives a healthcare service – a service that can relieve pain or prevent disability or death – ought not to depend on one’s ability to pay, but that healthcare services ought to be equally available to everyone. The only way to achieve this goal is to collectivize and centralize healthcare decisions and healthcare spending.
For proponents of Method Two, healthcare services are indeed fundamentally different from all other human needs – food, clothing, etc. – since the kind and the amount of healthcare services one needs are much less a matter of individual choice, but are foisted upon one by fate. Burdening individuals with the need to pay for such arbitrary and uncontrollable costs is not only unethical, but destabilizing.
Requiring individuals to pay for their own healthcare is destabilizing because, if a person’s lifetime of work and saving can be wiped out in an instant by an unexpected illness, people will be much less willing to work hard, take risks, and otherwise engage in the economic activities that drive our society. “Healthcare security,” which can only be provided by collective efforts, is thus necessary to a robust and sustainable civilization.
The methods by which healthcare costs can be controlled under a centralized system are straightforward. Obamacare, for instance, does so by explicitly empowering a (nearly) all-powerful Independent Payment Advisory Board (IPAB) with all macro-level healthcare spending decisions. Furthermore, “guidelines” promulgated by various other expert panels will control spending at a more granular level, by determining which specific services doctors will be permitted to offer to which patients, and under what circumstances. Doctors will be strictly held, under the threat of criminal prosecution, to these guidelines. Finally, recognizing implicitly that many healthcare needs are indeed determined by individual lifestyle choices rather than purely by chance, public health experts will advance enforceable policies that will determine what and how much we eat, when and how long we sleep, what products we acquire and how we use them, and what activities we are permitted to perform where. (The public health experts are off to a very good start in this effort!) If everyone within the healthcare system (and in our society) will simply follow the multitudinous directives laid out by the legions of sanctified experts, costs will at last be contained, and all will be well.
Regular readers will understand that there is no need for DrRich to reiterate in any detail here the arguments that have been raised by opponents of Method Two. These arguments can be summarized simply as follows: Method Two inevitably leads to tyranny.
Method Three: Provide strictly limited public support for basic healthcare services, with individuals responsible for the remainder.
Method Three attempts to combine the benefits of Methods One and Two, while avoiding their major disadvantages. Method Three recognizes that paying for all of one’s own healthcare is beyond the means of many individuals, and that therefore a modern, civil society ought to provide at least some healthcare to at least some of its citizens. At the same time, Method Three recognizes that the public funding of all healthcare is beyond the means of society, will inevitably lead to ruin, and that (both for these practical reasons and for ethical reasons) individuals ought to be responsible for paying for at least some of their own healthcare.
Numerous configurations are possible under Method Three. The key to controlling costs is that the dollars which society will spend on healthcare for individuals must be strictly defined and strictly limited, and cannot be open-ended. Method Three ought to assure that individuals will have ready access to, and the means to pay for, basic healthcare services, and that the chances of being financially ruined by a catastrophic illness are very low, but at the same time that most individuals should not and cannot rely entirely on public funding for their healthcare.
Examples of “Method Three” configurations include the detailed three-tiered solution that DrRich proposed in his book; the Ryan plan, which would limit Medicare expenditures by providing seniors with a fixed amount of money – on a means-tested sliding scale – with which to purchase their health insurance of choice; and, at least arguably, the original conception of Medicare, in which it was at least legal, if not expected, for seniors to pay for additional, non-covered medical services with their own funds (an option which is now very difficult, and often illegal).
How is the battle shaping up?
As DrRich sees it, Method One is simply a non-starter. For all practical purposes, and for good or bad, we moved irreversibly beyond a purely self-pay healthcare system over 60 years ago. So the real battle is between Method Two and Method Three. The feud between these two methods is going to be a bloody one.
The key difference between these two methods – both practically and philosophically – is whether individuals will be permitted to pay for at least some of their own healthcare with their own money. For reasons DrRich has laid out previously, it is imperative under Method Two that all healthcare decisions and all healthcare spending be centralized. There can be no compromise on this. The moment a compromise is made, we will inevitably wind up under a Method Three healthcare system.
Proponents of Method Two do not like DrRich (and have said so many times), because he has concluded (and often repeats) that, viewed objectively, the only logical reason these people fight so hard to keep individuals from being required (or even permitted) to assume at least some financial responsibility for their own healthcare, is that their actual prime objective must be something other than to fix the healthcare system and control healthcare expenditures. Rather, their actual prime objective must be, and can only be, to centralize the control of our society. The healthcare fiscal crisis is merely the most expedient vehicle to achieve this prime objective. (Progressives mean well, as DrRich has said many times, but their plan for a perfect society is always based on the need for all of us in the great unwashed masses to subsume our individual prerogatives in favor of the dictates of the enlightened leadership. Unfortunately, history teaches us that this plan never works out well.)
If this battle is ever resolved, therefore, it will hinge on whether individual Americans retain the legal right to purchase healthcare services with their own money. DrRich admits that this conclusion, regarding the essence of our ongoing healthcare debate, is not one which has been remarked by many other commentators on healthcare policy. It is, nonetheless, the case. An objective observer who pays close attention to the machinations of the nameless bureaucrats who are currently writing the rules and regulations under which Obamacare will finally be prosecuted will see that it is so.
What about Method Four?
There is little reason to spend much time discussing the fourth and final method for controlling healthcare expenditures. Nobody is a proponent of this method, so nobody discusses it. However, Method Four, at this moment, seems to be the most likely outcome. Indeed, at this moment it is our default method of choice.
Method Four is formulated as follows: Our skyrocketing healthcare expenditures are the chief driver of our national debt. Our national debt burden, unless we get control of it by controlling healthcare expenditures, will inevitably destroy our civil society. At the same time, our modern, sophisticated and very expensive healthcare system utterly requires a complex, modern, organized, high-tech society in which to function.
Therefore, our skyrocketing healthcare expenditures ultimately provides its own cure. Once society collapses, “healthcare services” will revert back to the roots-and-poultices methodologies that served mankind so well for millions of years. And healthcare, as well as other modern geegaws like cable TV and the Internet, will no longer be a fundamental human right, but will become a mere afterthought (if a thought at all) in a more primitive kind of society where life is nasty, brutish and short.
So, not to worry.
In response to DrRich’s recent post on good debt vs. bad debt, Liz writes:
Is the survival of the individual, after consuming healthcare, necessarily neutral to our national economic health? On the one hand, if an individual is saved from death by consuming healthcare and goes on to be very productive in life, then that healthcare would have been a good investment. On the other hand, if someone else is saved by doctors, only to go on to require more and more medical care without contributing anything to the collective, then the individual’s survival has a negative impact on the nation’s economic health. . . . Some people will argue that keeping people healthy is a good investment for our country.
This comment was triggered by DrRich’s premise (modeled after Alexander Hamilton) that for the federal government to acquire certain kinds of debt – say, borrowing money to build a new hydroelectric plant that will supply electricity to a large region of the country and thus enable sustained economic expansion – is truly a positive investment for future generations, and is thus justifiable; while aquiring certain other kinds of debt – for instance, purchasing goods or services for individuals, which the individuals then consume in the normal course of their lives – leaves nothing for future generations aside from the accumulated debt, and thus is fundamentally unjustifiable.
Liz rightly points out that not all the debt we accumulate to pay for Americans’ healthcare is of the latter variety. It is certainly true, for instance, that going into federal debt to purchase a liver transplant for Steve Jobs would end up being a positive investment over time. There are certainly many people less notorious than Mr. Jobs – possibly millions – who might also fit into this “good investment” category.
So, Liz’ comment implies, it may be that increasing the federal debt to buy healthcare for Americans – at least some Americans if not all* – actually constitutes a good investment, and therefore good debt.
* Progressives, despite their protestations to the contrary, have actually given a lot of thought to which individuals should receive priority for healthcare services once they have the single-payer (centrally controlled) system they have long desired. They have occasionally, in unguarded moments, opined publicly on which sorts of Americans should receive expensive healthcare services and which should not. Their proposed rationing methodology indeed shunts healthcare services to those individuals who are judged to be “productive” by the Central Authority. In their 100-year history Progressives have never been slow to pass harsh judgment on the worthiness of various groups or individuals, and there is no sign that they will behave any differently going forward. (DrRich, even if he were not an old fart, fears he would not wind up in the Central Authority’s “good” list.)
There are certainly examples of Americans happily agreeing to pay collectively for services consumed by individuals, because doing so is a good investment for the future. Chief among these is public education. Unarguably, an educated public is critical to continued economic growth and development, so (leaving aside for now the actual effectiveness of public education) paying collectively to educate all American children unquestionably benefits all current and future Americans.
Some would even argue – and DrRich would agree – that maintaining a certain level of health among the population is just as important to continued economic growth as is public education, and so paying collectively to achieve such a thing is equally a good investment. This is why DrRich fully supports many collective efforts to assure public health, such as assuring clean water, keeping air pollution to a minimum, and maintaining a healthy and safe food supply.
But DrRich’s thinking on the matter is even more radical than that. DrRich believes that it is indeed reasonable, and likely a good investment for the future, to use collective funds to pay for some of the healthcare consumed by individual Americans. If Americans know that, no matter what their socioeconomic status, they are unlikely to become financially ruined because of some expensive medical catastrophe, they will be more willing to take the risks one traditionally takes (under a vibrant capitalist system) to grow one’s own wealth – and the overall economy.
So, to some extent, DrRich believes that collective spending on the healthcare of individual Americans can indeed be an investment for the future, just as President Obama says.
But the key phrase here is “to some extent.” That is, we cannot furnish every bit of desirable healthcare for every individual, because that way lies ruin. We must set limits. DrRich has a simple rule for determining when our collective spending on healthcare is “too much.” Our collective spending on healthcare is too much when the level of debt we’re accumulating to pay for healthcare is sufficient to threaten the economic destruction of our society. Triggering societal collapse, DrRich thinks, completely negates any “investment value” we might obtain by purchasing healthcare for individuals.
The healthcare system we have today, and the one we will have under Obamacare (at least, the kind of Obamacare that Progressives will admit to at this point), exceed even this very modest definition of “too much.”
DrRich has proposed a structure for an American healthcare system that would offer healthcare to each individual, without accumulating an unsustainable debt, and he has described it in detail in his book. Simply put, it is a 3-tiered system. In Tier 1, individuals would pay for (say) the first $3000 per year of their own healthcare expenses. Tier 1 spending would be funded from a tax-deductible, self-funded, self-owned Health Savings Account. Individuals below a certain income level would have their HSA funded by the government. Tier 2 would be a government-funded universal basic health plan, under which most additional healthcare expenses would be covered. However, in the interest of keeping federal debt to a manageable level, Tier 2 would function under an open, completely transparent system of rationing. While most things would be paid for, some would not. The rationing system would allow the government to control how much it spends on healthcare each year, thus avoiding the crushing debt burden we are accumulating today. Tier 3 would be an optional, self-funded health insurance product that would cover extraordinary expenses that exceed the $3000 per-year individual limit, and are not covered under the Tier 2 rationing plan. Tier 3 would return the health insurance industry to the business of selling an actual insurance product (that is, a product that prevents individuals from financial ruin due to relatively unlikely future events), instead of whatever it is they’re selling today.*
* Thus, DrRich’s plan would give the insurance industry what it desperately needs – a new business model – without having to sell out to the Central Authority and survive under the diminished status of public utility.
Conservatives hate DrRich’s system because it includes a universal health plan. Progressives hate DrRich’s system because it does not offer enough centralized control, and indeed encourages (even demands) that individuals take chief responsibility for their own healthcare. So DrRich does not reiterate his plan for healthcare reform because he thinks it is even remotely possible that such a thing will ever be adopted, but simply to illustrate that it is indeed possible, with just a little effort, to imagine a healthcare system that actually meets the goals that Progressives and conservatives will admit to in public – and that honors the worthiness and the potential of each individual.
The last two weeks have made clear that the debate over our national debt will play a major role in the next election cycle.
On one side, many Republicans, lead by Representative Ryan, insist that the rate of growth of our national debt – especially the massive projected growth of Medicare and Medicaid – promises to destroy our society within a generation or two; and that the only way to avert that catastrophe is to make substantial structural changes to our entitlement programs. The subtext of their message is: Federal debt is bad, and debt of this magnitude will be fatal.
On the other side, most Democrats, led by President Obama, stress that our entitlement programs are promises that simply can’t be changed in any substantial way, insist that such entitlements are “investments in our future,” and suggest that whatever shortfalls our current system might encounter can be remedied by taxing millionaires and billionaires. The subtext of their message is: Federal debt can be a force for good, and in this case will trigger a much-needed redistribution of wealth (which is a primary goal of Progressives).
The debate over the national debt is as old as the Republic. In the original version of this debate, the part of the modern Republicans (i.e., debt is bad) was played by Jefferson, and the part of modern Democrats (i.e., debt is an investment in the future) by Hamilton.
In the early 1790s, unsupportable debt obligations, accumulated during the Revolutionary War and held by the various states and by private individuals, had entirely frozen up the credit markets, and precluded the brand new United States from having a functioning economy. Hamilton’s idea was for the federal government to buy up all these private and state obligations, and then issue federal bonds to raise enough capital to pay off the debt and to provide stuff, like a United States Navy, that would encourage investment and economic growth. (That Jefferson so viscerally disagreed with this approach, believing that all Americans should grow their own food and make their own clothes, etc., and that a national financial system was not only unnecessary but dangerous, was one of the chief factors that led to the two-party system in the U.S.)
Hamilton ended up doing a deal with Jefferson, and got his way (agreeing to move the nation’s capital southward, where the feds would find it more difficult to undermine some of the south’s more peculiar institutions). And as a result of Hamilton’s massive and unprecedented bailout of the various states and private investors*, the United States of America became not only one united country, but a stable and growing concern. Indeed, it is arguably by this action that Hamilton definitively earned his place as one of our most important Founding Fathers.
*Many of the “private investors” who needed to be bailed out turned out to be prominent political figures and supporters of Hamilton, whose names we’ve all heard and revered, and whose shady deals had helped to produce the fiscal crisis in the first place. So there are indeed many parallels to our current situation.
Clearly, not all national debt is bad. Sometimes, just as President Obama insists, acquiring debt can be an investment in the future.
In fact, Hamilton’s great insight was that national debt can be the engine of economic growth. When the government borrows money to build out the national infrastructure, to provide easier access to markets, to provide easier transportation of goods, to provide easier access to energy, and to provide a stronger military to guarantee that its investments are safe, the government is doing what businesses do when they want to grow. It is borrowing money today that will generate economic growth, and that will, in turn, repay that borrowed money with interest. That’s good debt.
When Hamilton bailed out the various states and the private investors, he was essentially buying up war debt. He was taking upon the federal government the responsibility for paying for the war that had created the United States in the first place. In economic terms the Revolutionary War was like the high-risk start-up that exhausts its funding in creating its product. While the product of their effort (i.e. independence) was intrinsically very valuable, the various states had bankrupted themselves in achieving it. And because the states were bankrupt, commerce was paralyzed, and the new country was about to break up into warring factions. Hamilton saw that by creating a central entity to buy up the debt, and to raise capital against the country’s new independence, he could realize the intrinsic value of the new nation. Hamilton’s debt, because it was truly a catalyst to pent-up economic potential, was good debt. It truly was an investment in the nation’s future, one that paid off for future generations of Americans beyond even his wildest dreams.
On the other hand, when we accumulate national debt not to catalyze a growing economy, but instead to buy consumable products for individuals that the individuals “ought” to be buying for themselves (because they are consuming the products themselves), that’s just debt. It’s like credit card debt – it’s debt that is not paying for itself by stimulating new economic growth for the borrower, but instead it’s debt that will just have to be paid off sooner or later, and that in the meantime requires large payments in the form of interest. Such debt is not an investment in the borrower’s future; it’s not creating future growth that pays for itself. Instead, this kind of debt often compounds until it collapses of its own weight. That’s bad debt.
That’s the kind of debt, for instance, that was created by the mortgage crisis. The federal government has now gone into great hock buying up mortgages taken out by its individual citizens. It is taking steps to help those individuals stay in the houses they cannot afford, and to protect the institutions that made those bad loans. It is not taking active steps to stop the issuing of the sub-prime mortgages that created the crisis in the first place. One of the chief reasons we hear for freeing up the credit markets is so that more sub-prime mortgages can be issued. The notion that all Americans should have access to reasonable shelter is a compelling one. But that’s different from a policy that allows individual Americans to choose their own shelter, from a vast array of choices, and then send the taxpayer the bill.
While going into national debt bailing out the sub-prime mortgages is bad debt, it is nothing compared to our going into national debt buying healthcare for individuals. Our accumulating healthcare debt is really bad debt. According to the GAO, we’re already committed to accumulating $25 trillion to $55 trillion in healthcare debt over the next several decades. Furthermore, when a person “consumes” healthcare, it is well and truly consumed. There’s nothing left (except, for the individual, some chance of prolonged life or less suffering, which is good for the individual but neutral to our national economic health). At least when the government buys up mortgage debt it owns actual real estate, which has some intrinsic worth. Not so when buying up healthcare debt.
So going into massive debt paying for Medicare and Medicaid is not the same as the debt Hamilton took on in the 1790s. We’re merely accumulating debt, and not stimulating future growth. In fact, our irresponsible accumulation of bad debt is stifling economic growth.
So President Obama is correct to the extent that, sometimes, taking on a certain amount of the right kind of debt (the kind that stimulates real economic growth) can be an investment in the future.
But the Republicans are correct that the debt we’re taking on to pay for Medicare and Medicaid is not that kind of “investment,” but is a fiscal black hole – as we will all find out if we don’t get this debate right.
Dr. Marya Zilberberg has an interesting post on Kevin,MD, speculating on the effect a worldwide oil shortage will have on healthcare, and what we ought to do about it. Marya is herself a notable blogger who has commented here several times (but whose comments, alas, were among those lost when the catastrophe struck), and she is one of the more thoughtful critics of DrRich. Her criticisms are always fact-based rather than ad hominem, and thus she always gets DrRich to thinking. Her post on Kevin, MD had that typical effect.
So DrRich hopes his readers will give Marya at least a little of the credit for what follows.
We as a nation face several apparently intractable problems at the present moment. Indeed, the problems individually seem so unsolvable that it will obviously take some major “outside of the box” thinking to solve any one of them, let alone the whole mess.
DrRich refers, of course, to the following five problems:
1. We as a nation face more than $50 trillion in debt obligations over the next several decades, thanks to Social Security and Medicare alone. This is an obligation we have no prayer of meeting.
2. Thanks to that massive accumulation of debt, we as a nation are mortgaging our futures to foreign nations, principally China. In fact, this totalitarian power will soon have veto authority on any initiative the US proposes to take.
3. We face an apparently growing threat of terrorist attacks whose base of operations (while it may be insensitive to say so) is in the Middle East.
4. Thanks to our profligate use of oil products, we are causing runaway global warming (and anyone mentioning the past decade of global cooling is a global warming denier).
5. As Marya points out, we appear to be drawing ever closer to a worldwide oil shortage that will threaten every aspect of our lives, even our healthcare.
Marya’s post was the key for DrRich.
DrRich, being a conservative American, has previously subscribed to a “Drill, Baby Drill” sort of philosophy. After all, we have oil in the ground, and we need oil to run our economy – so let’s go get it ourselves, instead of paying all that money to Middle Eastern and Venezuelan dictators, who just turn around and give it to terrorists.
But now DrRich sees the error of his ways.
There is a simple and straightforward solution that addresses all five of our intractable problems, indirectly if not directly.
Here it is: Stop drilling altogether. Leave American oil in the ground. And buy up all those other peoples’ oil (and take physical possession of it) – as fast as we can.
The estimated worldwide oil reserve is about 1 trillion barrels. Let’s buy as much as we can of those reserves, and bring it here. At $100 a barrel that’s only 100 trillion dollars, or only twice what we’re obligated to pay for our old farts over the next few decades. But the difference is, when we spend all that money on Social Security and Medicare, all we’ve got to show for it is old farts who are even older. But when we spend that money buying up the world’s oil, we’ve got a corner on the market.
Where are we going to put all that oil, skeptics might ask? Why, we’re going to store it in the rapidly-depleting Ogallala Acquifer, which is capable of holding up to 978 trillion gallons. The world’s oil reserves, if we choose to follow DrRich’s plan, will be right under Kansas and Nebraska – the heartland.
Even if the price of oil rises to substantially higher than $100 per barrel (which it certainly will as the world’s supplies become sequestered beneath Lincoln and Dodge City), it will still be a bargain for us to buy it up. It will be a bargain at any price. After all, we’re already in a debt hole so deep we cannot possibly get out of it. If we’re destined to perish in a sea of debt, we might just as well drown in $500 trillion as $50 trillion of debt. We’ll be just as dead either way.
So we should be delighted to accumulate whatever amount of debt is required in order to corner the world’s oil market. It’s our only hope.
Because, when the only oil left in the world is American oil, we strike back. Our oil will be a precious, life-sustaining commodity, which nobody in the world can do without. Even if energy technology develops to the point where people can really fly around in airships powered by solar batteries, oil will remain precious. Just try building those solar batteries without petroleum products. Marya herself points out that it’s only petroleum products which allow us to do all the remarkable stuff we do every day in healthcare, as well as in every other modern endeavor.
We’ll be able to charge whatever we want for our oil – DrRich (a humanitarian) is thinking merely $1000 a barrel, as a nice round number. We’ll be able to pay China back, and any other of our debt holders, in a trice. And in another trice they will all owe money to us (like in the good old days).
The Middle Eastern terrorists will become defunded.
Since nobody else in the world will be able to engage in hydrocarbon pollution any longer without our say so, we can control worldwide carbon emissions as we see fit, and “tune” the earth’s temperature like a fine clock.
Best of all, since (according to the current plans of our leaders) the American government will remain permanently in the hands of benign progressives, who by definition care very deeply about the people of the world, all this will be done with the most beneficent of intents, which will assure the very best of outcomes.
Of course, none of this will work if it turns out the world’s oil reserves are vastly greater than current official estimates. This might be something to think about, considering that today’s oil reserves are twice what they were in 1980, even though we’ve burned through (and, of course, spilled) 30 years of oil since then. Thankfully, the experts assure us that this time they’re correct. And if we’re not going to listen to the experts, what the heck are we paying them for?
Besides, given our current situation, we have nothing to lose by trying. So: Cap, Baby, Cap!
DrRich explains it all in, Fixing American Healthcare – Wonkonians, Gekkonians and the Grand Unification Theory of Healthcare.