Category: Government at work
Posted by George Bullard on Thu, Nov 5, 2009 at 7:18 PMHealth care reform: the federal hand is in your pocket again
Another health care report:
If you're not outraged by the House proposed health care reform, you should be.
Especially if you're middle class.
The numbers have been analyzed a number of ways (see previous blog), and here's is another:
A family of four making $78,000 a year will eventually paying an average premium of $8,800 plus $5,000 copays, says the Congressional Budget Office.
Imagine that.
After paying federal income tax, state income tax, sales tax, excise tax, gasoline tax, property tax, state and federal fees and social security ax, the feds want another $13,800 out of your hide.
Odds are you'll be handing over 50 percent or more of your income so somebody else can spend it for you.
The idea of forcing families to buy something, like health insurance, is obnoxious on its face.
As economist Peter Schiff says in his books ("Crash Proof" and "Crash Proof 2.0"), people in China have more economic freedom than the U.S. That's why China is poised to be the world's next great economic power, and the U.S. is reeling.
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Our Markets are not "Free Markets"!
What does the American auto industry, the health care industry, wall street firms and the banking industry all have in common; other than they were all on the brink of failure?
These are industries where the production side of the industry is no longer a free market with many producers competing head-to head to earn the business of consumers, or customers, of the industry. Instead each of these industries are controlled by a relatively small number of very large corporations that have transformed these markets into oligopolies.
Adam Smith when he discussed "rational self interest" and competitive markets in his book Wealth of Nations, envisioned many consumers buying goods and services from many producers with everyone looking out for their self-interest. By keeping markets "free", producers pursue rational self-interest and this will best meet the needs of the consumers and the citizens of our country. Under this system of free markets, what is in the producers self interest is to provide the best product possible to the consumer, while striving to be a low cost producer for their niche.
This consolidation of markets began in the late 1960's early 1970's in the auto industry when it was transformed from a free market to an industry that was controlled by three giant corporations and one union. As this transformation was occurring the auto company's and auto union's self-interest became separated from what the consumer wanted and/or needed. Competition between the companies broke down and this gave an opening for foreign competition to enter our markets and the beginning of the end of the American auto industry as we knew it.
Other industries saw what was happening in the auto industry and saw that government was not objecting so naturally they followed the same path with little concern on any ones part that we were losing our free market system to a more centralized market system of oligopolies. As a result we now have major markets where the producing entities self-interest is not always in line with the self-interest of the consumer. What is in the self-interest of the entities in these industries is to keep the oligopoly alive. Thus the creation of special interests and lobbyists.
These oligopolies have bought the protection of our representatives in Washington and state capitals. I am always baffled by the fact that corporations and unions cannot vote in this country, however they are allowed to buy votes with their contributions.
We lost track of a key ingredient that Adam Smith identified as necessary in order for "rational self interest" to work. There must be many producers. In too many industries, the number of producers has shrunk and the ones remaining have gotten "too big to fail". This is true in the auto industry, the banking industry, wall street, health care and will soon be true in the computer software industry.
When discussing the health insurance industry proponents for this specific oligopoly site the fact that the bigger the insured pool, the lower insurance premiums can be. However, I submit that this "bigger pool savings" is more than offset by the fact that the rational self-interest of the companies is not totally aligned with the rational self interest of the insured. The insurance industries self-interest is to keep the oligopoly alive. The self-interest of the insured is to have as many insurance companies as possible clawing to get his business and thus ringing out all excessive cost, including unconscionable salaries for top executives, to earn the consumers business.
The liberals are right that regulation is required and conservatives are right that a free market is the best way to meet the needs and wants of our citizens. The common ground is that regulation is essential to make our markets more free. We have too many industries where companies have too much power, their self interest is not aligned with the citizens of this country and they are too big to fail.
It is time that our politicians breakaway from the shackles of oligopolies, special interests groups and lobbyists. Use antitrust legislation to bring back free markets.
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