Saturday, August 29, 2009

Elucidating Senator Kay Hagen (D-NC)

I was listening to a radio interview with North Carolina Democratic senator Kay Hagen. To say the least it was amusing. She vacillated on whether she would vote for tax increases to pay for a public option. She vacillated on whether she'd vote for any bill with a public option.

What I found was most annoying was her assertion that the present proposals would cut costs by encouraging people to avoid the emergency room and visit their primary physician.

I can tell you that the opposite will happen - based on my experiences in Canada. Assuming we have a "public option" that will pay like medicare - i.e. below market rates, we will eventually see a doctor shortage as prospective doctors will see the hassles and pay not worth the time to go through the education and training required. In Canada, the provincial governments deliberately created a shortage of doctors - believing that doctors, via their billings, were the prime cost driver of public health care. The provincial governments limited the spots in medical schools and capped billings by doctors.

There are three levels of doctor shortages in Canada. If you're in a major metropolitan area - you have to book your appointment with your G.P. several months in advance. If you're in a minor city (i.e. around 100,000) - you may or may not get a doctor. In my case - I called in a few favours from some school friends to get a doctor. So your rolodex is your friend in socialized medicine.

If you're in a rural era - you're SOL. Some practices have lotteries to see which people will become patients. The rest are stuck with the emergency room.

So what happens down here is that if you force everyone to be paid at Medicare rates under a "public option" - you'll have fewer doctors practicing and those without one will be forced to the emergency room - which will raise costs. Go to an emergency room in Canada - most of the people are there for stuff that a G.P. should do - but they don't have one. Because people don't pay out of pocket - they'll abuse the E.R. You see it here with medicaid recipients clogging the emergency rooms.

So Kay Hagen doesn't know what the heck she's talking about.

Sunday, August 16, 2009

So much for Keynes

Over the past year or so, much of the press and the political class have been talking about how Keynesian policies are making a comeback. Things like government spending to stimulate the economy, etc are all in vogue now.

Although I think Keynes general theory does not work, I understand the intuitiveness of his theory. I think that the key premise of the his theory is that government needs to be counter-cyclical to the economy. In other words, governments should be hiking taxes/cutting spending/removing stimulus in up cycles and increasing spending/cutting taxes/adding stimulus during downcycles. The premise being, that government would temper the excesses of up cycles by pulling excess capital out of the market by fiscal policies and the severity of down cycles would be minimized as well.

Once again, the destroyer of most economic and political theories is once again - human nature. Recent history has shown how politicians cannot help themselves. During the up cycles through 1991-2007, federal and state governments slashed taxes and ramped up government programs - goosing an economy fueled by artificially low rates. Now, that times are tough - these same governments are cutting spending and raising taxes (at least on a state level, the federal government is raising taxes and increasing spending), which will not help one bit.

The problem is that politicians are incapable of not expanding the scope of government: they are addicted to increasing spending and incapable of cutting it. The taxes are just the result of this problem. This is why Keynes belief that government spending must be counter-cyclical cannot be a reality.