December 26, 2008

MoveOn fails Economics 101

I was checking out the website this last Wednesday - to see if there's any new radical progressive lunacy worth reading for a good laugh. There was the usual stuff to be expected -an article and video about Al Franken needing help because Norm Coleman is obviously evil. An article of talking points on John McCain. Complaints about Iraq. The usual stuff. By the way, I didn't see any apology to General Petraeus. Maybe I missed it.

What caught my attention was the front page pseudo-mission statement:

Hundreds of thousands of us voted, and now the results are in. We now know what to focus on in 2009: universal health care, economic recovery and job creation,building a green economy and stopping climate change, and ending the war in Iraq.
Two things struck me. Firstly, that's a lot of stuff for 2009. And for, I have 3 words: Go For It. 4 top priorities being focused on means you'll accomplish zero. Way to spread yourself thin. Be ambitious and choke on the mammoth proportions of what you've assigned for yourself. Accomplish nothing and leave your members disillusioned for 2010. That works well for me and hopefully the GOP in 2010 too.

Secondly, and most interestingly, the number one priority is universal health care. That's number one? In a potential super-recession that Obama must 'lead' us from as if he were the new Moses with $1 trillion deep pockets, MoveOn deems universal health care the biggest thing needing attention. I read further and found this quote at the head of the reasons behind the choice;

If this country had universal health care, it would help the economy. Our businesses would not have to be at such a disadvantage competing with global companies whose countries DO have national health care. It would also help individuals and families, economically, as many of us go into debt to have health care, or don't have it at all.”—Jane D. Montpelier, VT
Universal health care, which likely would outstrip Social Security as the biggest funding requirement of a cash strapped (but free-spending) government, is good for the economy? How shall I call thee uninformed? Let me count the ways.

1) The costs would sink the government. Who's going to bail out Congress, the Senate and White House when they are the next Big 3 on the verge of financial collapse?

2) The Big 3 serve as a prime example of what UHC would not achieve. The cost burdens on the Big 3 do not go away with the advent of UHC. Of the $70 per hour in fully loaded labour costs, about half is in benefits.

Benefit/government required programs in 2006 added an additional $33.58 for each active hour worked. These costs include: group life insurance, disability benefits, and Supplemental Unemployment Benefits (SUB), Job Security (JOBS), pensions, unemployment compensation, Social Security taxes, and hospital, surgical, prescription drug, dental, and vision care benefits.
It's further worth noting that any benefits to GM would also accrue to Toyota. The UHC change does nothing to switch those competitive advantages away from Toyota, it just lowers both automakers the same amount.

3) UHC will not cover everything, it doesn't in Canada, and it doesn't cover prescription drugs, which are often a major component of health care. In Canada private insurers still are responsible for those benefits and they are still funded in most cases by employers.

4) How much of the established health care trust the Big 3 worked on with the UAW already mitigated their exposure to this issue?

5) Other industries like the insurance industry would see a negative impact, as well as the medical industry in general. With UHC health care comes regulation and mandated charges per procedure or visit. In Canada the best doctors 'all' try to move to the US because they are making a fraction of the potential they can in the US. It's called the brain drain. Let me show you a crude Microsoft Paint sketch I threw together.

Sorry for the quality, I'm no artist.

These are a Supply and Demand curves. Don't be afraid - it's pretty simple. At every price suppliers (in this case medical) will supply a product/service. The higher the price, the more they will be willing and able to sell. Conversely, the higher the price (on the left side of the graph) the less consumers are willing to buy it or afford it. If a 60" LCD sold for $12, how many would you buy? What if it sold for $100,000?

This system is true universally. Even in socialist countries it cannot be avoided, it is reality. It can however be manipulated in many ways. Systems always try to work their way towards equilibrium - that is, where the supply and demand curves meet. They don't always get there but that's the natural inclination. Here's where the socialism comes in.

Lets assume that the system is at or close to equilibrium for tonsil removal. That is P1 (original price) and Q1 (original number of tonsil removals). Say it's $100 and 1,000,000 tonsils get removed every year at that price. If the government comes along and says instead of $100, we're going to mandate a price ceiling of $75 (P2), then what happens? The curves no longer meet at that point. Suddenly the number of doctors willing to do tonsillectomies drops to Q2S. Let's say enough to do 700,000 per year. Even at the original demand we have a shortage of 300,000 per year. But something else happens. Those who couldn't previously afford it are now willing to consider it because it has become affordable for them. Let's say another 200,000 people want to have tonsils removed. The shortage becomes more acute. We now have 500,000 people a year not getting tonsillectomies who want or need them. Yikes!

What ends up happening is that one or both of the supply and demand curves moves to accommodate the new reality (price shock). Likely both will start to occur. The government, sensing a shortage, is likely to mandate more tonsillectomies. You know how they like to meddle - it's what they do. They artificially try to manipulate supply. But just as you can't make somebody buy something they don't want, you can't make somebody sell something they don't want to either. Not in a country where freedom exists.

What happens is doctors retire. They move to another country where they can make more. Some go back to school to become lawyers instead. They become specialists in fields other than tonsillectomies. They limit their patient lists to the wealthiest or those who will pay a premium for express service. Kids in medical school re-think their priorities "I'll go into law instead because the government hates the idea of tort reform anyway." The supply curve moves to where it wants to go anyway. On the demand side the reverse happens - waiting lists of months, people going elsewhere to get it done if possible (e.g. Canada or the UK), people finding illegal suppliers of the tonsillectomy where they can pay even less than $75. It's not a pretty sight.

What it effectively does is suppress talent. Particularly the top tier of talent. In the medical field the United States goes from being the pioneer to being an also ran. The refrain about how it works so well in other countries is hollow. I took my son into emergency here in the Toronto area last summer - he got a tiny piece of stone chip in his eye. I tried to fix it myself, but I couldn't. So we went to the hospital. Why not - it's free here. We sat in the waiting room for 5 hours. Not because of prioritized emergencies. There was nothing critical that evening, there was just a line up. Ironically, the couple ahead of us had their daughter there for the exact same issue as my son. When we finally saw the one doctor on duty for the entire emergency ward, he was at the end of his shift and exhausted. He took care of the problem with a swab in about 30 seconds. The wait time to visit time ratio was horrific. I would have gone to a clinic or the family doctor but at the mandated prices doctors can charge for visits on a Sunday evening, they were ALL closed.

Is that the vision MoveOn has for America? Probably not, but it is the reality they are intent on imposing on you. Don't let them do it.

1 comment:

  1. Great post. Check out the Health Care costs of Blue vs. Red States interesting. Thanks to pink elephant pundit for the below link.


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