Tuesday, July 12, 2016

Fanciful Thinking


Parts of this were interesting, like this:

Whether you agree with the adoption of Medicare and Medicaid in 1965 or not (there are plenty of arguments that these were not the best ways to expand coverage to the poor and the elderly), it is indisputable that both programs poured enormous sums of new money into the health-care system and dramatically raised demand for services.

Not surprisingly, increased demand without a corresponding growth of supply resulted in rising prices. This is axiomatic in any market, but it seems to have taken the experts by surprise.
And that, it seems to me, is the problem with almost any proposals made about health care including the recent proposal by President Obama to add a public option to the ACA and Bernie's idea of Medicare for all. There is plenty of evidence, going back thousands of years, in different cultures, geographies, and political systems that if prices are reduced, and supply doesn't increase, prices will increase. And that is exactly what most politicians are proposing, in one way or another, for medical care: mandating lower prices for consumers and thinking somehow that won't have an impact on demand and/or supply. It really is quite an extraordinary assumption and one contradicted by thousands of years of evidence.

It's the same type of fanciful thinking on the minimum wage, or mandated family leave, or renewable fuel standards. If the government says the minimum wage shall double, demand for labor will decline. Period. Even the proponents of the minimum wage, like you, know this because if you really thought the increase in the minimum wage had NO impact on labor demand you would raise the minimum wage to $20/hour or $50K per year. Heck, mandate wages have to be $300K per year. In the fanciful world of politicians where increased prices have no impact on demand, we would all be wealthy at the stroke of a pen. Mandated family leave will raise labor prices and lower labor demand. Period. Increasing renewable fuel standards raises fuel costs. Period.

If you say to me, I'm going to eliminate the price mechanism in health care and ration care via waiting times and/or eliminating payment for certain care, at least you would be honest. Or if you say, I think the minimum wage is one of equity and I'm willing to hurt some in order to help others, that would be honest.

But that isn't what is proposed, and instead we get fundamentally dis-honest arguments about health care, trade, immigration, energy and labor from Clinton, Trump and Obama.


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