Wednesday, June 24, 2009

The Public Option ... Only Your Wallet Will Feel the Squeeze!

In an editorial in the Wall Street Journal on Wednesday, Robert Reich argues that the central idea behind the public option for health care is to squeeze the profits of insurers and push them to make changes to reduce costs. This exposes his seriously infirm grasp of economic reality and points to his near religious belief in the power of "Good Government", a phrase which perhaps defines the word oxymoron. The only squeezing a public option would produce would be the squeezing of additional dollars from your wallet, and the only cost reductions will come from the imposition of health care rationing .

Mr. Reich is living both figuratively and literally in economic La La Land, with Liberally tinted political blinders so large that they block out reality. From his lofty perch at the University of California at Berkely, yes the very same California that is teetering on bankruptcy due to unrestrained "good governance ", a large part of which goes to pay for health care programs for state employees and the poor, he sends down his prognostications for fixing everything that is wrong with capitalism. His usual cure, as you may have guessed, is more spending on more "Good Governance". This time he's fixing health care.

You would think that with his bird's eye view, so to speak, of the destruction wrought by his beloved "Good Governance", he might change his tune. But this song bird of ever more government spending, can only warble for yet ever more government spending to fix the very problems too much government spending has caused. It's a vicious cycle.

That he can't or won't connect the cause (too much government spending) with the effects (a meltdown of his state's budget process) which have his state a mere 30 days from insolvency, and at the same time advocates even further expansion of the government's role in health care is nearly beyond belief.

The government option he promotes doesn't pass the economic smell test. People respond to incentives, even the " good governance" types will admit this when it comes to taxing cigarettes and soda pop, but not when it comes to government run health care. If you want less of something tax it. Want teenagers to drink less soda? Put a surtax on it. Want smokers to cut back? Add another dollar of tax, to the price of a pack of cigarettes. If, on the other hand, you want people to use more of something, lower the cost.

Robert wants to increase the demand for health care by providing it to more people for free, while at the same time reducing the cost. This flies in the face of economic reality. The end result is obvious. If you are buying steak for your family's dinner and your free- loading brother- in- law wants to pop by with his clan for a meal on the house , your options are the same ones the government faces . You can cut everyone's steak in half(rationing) eat hamburger instead (provide an inferior service) or bust the budget and provide steak for everyone.

Here's my prediction: When the same politicians, who only ever make political decisions because they are incapable of making economic decisions design and run your health care program, you'd better get ready to pay dearly. There will be lots of steak for some, a little hamburger for others and a great big tab for the taxpayers.

Monday, June 8, 2009

One Step Forward Two Steps Back... The Governments Strange Dance with GM and Fiysler!

The logic behind this ill fated rescue attempt of Green Motors and Fiysler (Fiat + Chyrsler = Fiysler, pronounced Fiz-ler) doesn't add up, but the tab that the government expects the taxpayer to pick up is mounting, and continues to add up and up and up! What started out as a $17.4 billion dollar bridge loan from the Treasury Department, via the Mother of all political slush funds, the TARP program, to forestall the inevitable GM and Fiysler bankruptcy has turned into an ongoing corporate welfare scheme whose price tag so far is a whopping $80 billion or so.

Even the No More Corporate Welfare Chorus in Congress has now changed it's tune, and is singing that classic hit by The Car's: "Let the Good Times Roll"! It is a pity these song birds don't know the next several lines of the song which are as follows:
Let the good times roll
Let them knock you around
Let the good times roll
Let them make you a clown
As the Auto Oracles in Washington warned, to let GM, or Fiysler for that matter fall into bankruptcy would mean the end of automobile manufacturing in the US and the collapse of the entire auto supply chain. As the months since it's dire warnings have passed, and the costs of keeping GM and Fiysler out of bankruptcy have skyrocketed, we can now see that it wasn't the sky that was falling, it was GM and Fiysler. The sky is still overhead where it belongs, and now so too are GM and Fiysler where they belong: in bankruptcy.

If the new GM and Fiysler that emerge from bankruptcy as less bloated organizations with greatly reduced liabilities, courtesy of taxpayers, bondholders, auto dealers and the rule of law, can be seen as one step forward, then the continuing militant culture of the UAW, that bought and paid for this egregious display of political favoritism and the government's mandates for smaller greener cars must surely be seen as two steps backward.

For this rescue to work, a smaller GM, with the UAW's two left feet now stepping on toes not only on the assembly line but in the board room as well , will have to dance it's way back into the hearts of the American car buying public and do what the old GM and Fiysler could never do: build small cars that the public will buy in large quantities, and do it profitably. If that is not enough to ensure their next bankruptcy filing, they'll need to do this while the auto oracles in congress call the tune for future design, production and distribution. Good Luck GM and Fiysler! Things are going to get small!

How small is small? As I looked down from the drivers seat of my 96 Jeep Cherokee at the Mini Cooper that had pulled up along side of me at the stop light, I noticed the new car sticker on the window which proclaimed the car's superior gas mileage. I also noticed it did not meet the revised cafe standards of 35.5 mpg's highway that the government has mandated, not that it missed by a mile, it only missed by half a mile, per gallon. I pointed out to my wife and 3 daughters who fit very comfortably in our car that Washington had decreed that this would be the new standard for size and comfort going forward. They pointed out to me that they weren't going to drive in a car like that because they wouldn't fit. Can you imagine that? A family- sized car that your family won't fit in! Only the government could do this with a straight face. When the comedian Steve Martin said to us "Let's get small," we all knew that he was was high. What excuse can Congress give?

When the bailout music stops the next time, I predict that once again it will be the taxpayers who are out of luck, looking for a seat and finding that in the politically charged game of auto industry musical chairs ,the unions having paid the man in charge of the music will get a heads up and grab the only seat left before the government calls "game over".

One last question: Why is there a need for Ford and the other two now bankrupt automakers to give $52,000,000,000 to the UAW's VEBA to fund health care costs if Obama and Co. are going to deliver on Universal Health Care?