Peterson's One Billion Dollar Debt Crusade

Wow, here's what's coming (from here):

From the NY Times:

Spending $1 Billion to Restore Fiscal Sanity, by John Harwood, NY Times: Gaffes have commanded presidential campaign headlines lately... Peter G. Peterson wants people to focus on what he considers real news: the nation is going broke.

Because he wasn’t born yesterday, Mr. Peterson, co-founder of the Blackstone Group and a secretary of commerce under President Richard M. Nixon, will spend $1 billion in an effort to get the public’s attention. The money ... will finance a media blitz, starting with a documentary, “I.O.U.S.A.”

The film aims to startle voters and politicians alike, and summon them to the task of closing the long-term imbalance between what the government will take in and what it has promised to pay out, most notably through Social Security and Medicare.

Mr. Peterson, 82, says he yearns for the can-do spirit that helped politicians forged by the Depression finance the G.I. Bill of Rights, the Interstate highway system and the Marshall Plan from the ashes of World War II. ...

“Has something fundamental happened to the character of our people or our societal structure, or has no one stepped up to provide the leadership?” Mr. Peterson asked. “We’re not going to know that until we try.” ...

Though Mr. Peterson has endorsed Mr. McCain, his efforts to control debt are bipartisan, and he has enlisted Robert E. Rubin, President Bill Clinton’s treasury secretary, to make his case. The foundation does not expect the candidates to propose comprehensive solutions while chasing votes; instead, it will pursue the more limited goal of dissuading the candidates from ruling out potential solutions.

Money Talks

At the center of Mr. Peterson’s plan lies “I.O.U.S.A.,” which will be screened for the news media in Washington on Monday and opens in 400 theaters next month. ... “I.O.U.S.A.” hopes to give as much cachet to long-term fiscal policy as “An Inconvenient Truth” gave to environmentalism.

Mr. Peterson’s foundation is planning an active Internet strategy, tapping bloggers and social networks to reach young voters, who typically pay little heed to far-off fiscal obligations. In early 2009, as the new president takes office, the foundation will try to draw attention with programming on public television, and possibly television advertisements and infomercials.

The effort resembles those of public policy advocacy groups, with a big exception: the money Mr. Peterson has put behind it. ... “You can buy a lot of airtime” with $1 billion, Mr. Peterson said. “People are going to hear from us.”

At some point we do have to face budget realities, and if we are going to deal with this problem, which is mainly a problem with rising health care costs (and that will be a problem whether it's paid for publicly or privately), I'd rather have it happen with a Democrats in charge. That way, the process is less likely to result in large cuts to necessary social programs (and we'd be more likely to get universal health care, something that could also help with the health care cost problem).

I haven't seen the movie, so I don't know for sure how the problem is presented, but the little bits shown above lead me to worry that this will create unnecessary fear about the budget in areas where such fear is unwarranted (e.g. Social Security, a place Peterson has focused in the past). The problem is that this can lead to solutions that satisfy ideological or political goals, but don't deal with the major problem. In any case, it looks like the budget hawks are about to become more vocal and aggressive.

Comments

[Movie Guy]

The timing couldn't be worse.

Get ready.

[Crusader]

What we need is more social spending.

[paine]

what gives here?
a billion bucks more 'll do the rick ....
does herr peterson after 30 years of this dribble
still figure
a votin' majority of us
will never
tumble to his three card montee ???

maybe he's right

when i think of all the budget fetish types
out there swimming among us
in dire panic cause uncle's goin broke...
even some totally hip
to the econ con scam

folks honest dues paying folks that figure
uncle's budget in the long run
has constraints on it much like
your household budget or mine
or GM'S or
"the state of kalllyfoooornyazzz"

[NLS]

The billion dollars this guy spends on his bullshit will be peanuts compared to the "middleman's money" to be had once these jerks convince everyone that SS needs to be privatized.

[kthomas]

This guy should hurry up die. And at this point, ANYTHING with Rubin involved is immediately suspect. Bipartisan, my arse.

[paine]

"mainly a problem with rising health care costs"
indeed
so lets construct a market based
mark up cap for the sector

who's sez the sector can't have at least half
its rent trap type
needless whole sector incentiveless
producers surplus
drained out of it
by a farly well designed mechanism
that preserves relative price incentives and rationing
while pulling off
a relative sector size compression

[anne]

While Mark Thoma was worried about how much is too much for dogs, I never worry about how much is too much for dogs or other animals, but this is the sort of too much to be worried about.

[robertdfeinman]

Look, western Europe, Canada and Japan provide better health care at about half the cost that the US does. Rising health costs are a political problem.

It is not a technological problem or an aging problem, if it were the other countries would be facing the same issues - they're not.

So we can solve the health problem anytime we wish to. Pick any combination of the following fixes:
1. Eliminate for-profit health insurance firms
2. Eliminate for-profit health providers (such as hospitals)
3. Eliminate patent protection for drugs funded by government research
4. Eliminate fee for service payments which encourage over treatment
5. Eliminate the influence of the drug and medical equipment firms in the FDA and over doctors
6. Require research funded by drug firms to clearly state the source of their funding
7. Require new drugs to prove that they are better than existing treatments, not just that they are better than nothing
8. Nationalize health care
9. Nationalize health record keeping and require all providers to link to a common system
10. Devote new R&D funding to real needs not treatments for baldness or shyness.

Sorry Mark, you have been misled by the medical/industrial complex. If you have any time you can read up on what experts in the field have to say about the corruption of health services. I'd suggest these two blogs as an easy introduction:

http://www.healthbeatblog.org/
http://carlatpsychiatry.blogspot.com/

[Winslow R.]

"G. Peterson wants people to focus on what he considers real news: the nation is going broke. "

Solvency is not an issue.

We should focus on the political choices that affect inflation and wealth distribution through taxation and spending.

Mark please balance out this trash you just posted as it appears you are falling to the Delong side.....

Why further confuse the confused.

You can skip the first minute but watch these videos for an antidote:

http://www.moslereconomics.com/2008/07/14/warren-mosler-speaks-at-pk-conference-parts-i-iv/

[roger]

The man's a McCain supporter, and he wants a balanced budget? I think he should make a film in support of pacifism too. Why not just let that cognitive dissonance go wild!

Nixon, luckily, wasn't stupid enough to worry about balanced budgets, and he had the audacity to impose wage and price controls, I believe. Well, we now have wage controls - aka a successful union-busting scheme - and as for price controls on oil, as Mankiw bravely wrote, leave those oil companies alone! That's a generally agreed upon point, from the halls of the University of Chicago to George Mason university, among economists. They've scientifically proven it would be bad for the wealthy! We can't have that kind of thing going on - or even suggested, even if it is Bastille day.

However, there is one thing I'm pretty confident about - the rightwing ability to attract crowds to see their movies is almost nonexistent if it doesn't involve an action hero or the flagellation of Christ. That's one billion dollars down the drain - much like the money flushed down the Vietnam war drain by Peterson's old boss.

[OhNoNotAgain]

Yes, how cute that once the Republicans have flushed a surplus down the toilet and racked up a huge amount of debt, and it looks like a Democrat will be in the White House soon, that we get a bunch of worrying and hand-wringing about our debt. Where were these assholes when the debt was being accumulated year after year ? Where were these assholes when it was decided to go blow a trillion dollars in the desert on some fanciful imperial expeditition just so Commander Codpiece can play dress-up ?

These people are worthy of mockery and nothing more.

[Bruce Wilder]

If this guy has a billion dollars, taxes are way too low.

[Cynthia]

The runaway cost of health care is the proverbial elephant in the room: everybody sees it, no one mentions it.

[sewells]

Personally, I plan to see it and I plan to evaluate the arguments it makes. Folk are really really worried that bailing out Freddie Mac and Fannie Mae might sink the system because they have 5 trillion on their books.

Inquiring minds would like to know whether the fiscal shortfall is really 40 - 70 trillion over the next decades. That kinda makes 5 trillion look like peanuts if it's true.

[lonesome moderate]

roger: Nixon, luckily, wasn't stupid enough to worry about balanced budgets, and he had the audacity to impose wage and price controls, I believe.

Nostalgia for the state of the economy under Richard Nixon? Yikes, thinks were screwed up enough in those days to make Shrub look good.

[ddt]

I don't think that the film is entirely a function of the propaganda campaign.

I saw a feature on CNN about the guy making the film a few months ago (I think he was looking to get more funding). I'm pretty certain he had no backer at that point. He was working on a couple mac pros in his back room.

I imagine that these guys probably saw that story, and then decided to throw their weight behind it.

[NC Jim]

No,No,No. We don't have a SS, Medicare, or Medicaid problem we have a priority problem or an asset allocation problem if you prefer. If America were to decide it was a great country instead of a global Empire projecting power at the service of the wealthy, the resultant savings in military spending alone would top off shortfalls in social systems and infastructure. But that would go against the American business plan of privatizing profits and socializing costs.

A billion$ is chump change compared to the fees derived from managing a couple hundred million privitized SS accounts or a month in Iraq.

Peterson is a shill.

Jim

[Richard H. Serlin]

The guy is so concerned about the deficit and he endorses McCain?? Whose gargantuan tax cuts, tilted heavily towards the rich, will make for even bigger deficits than what Bush gave us. How can he support the Republicans who consistently sky-rocket the deficit, as opposed to the Democrats, who under Clinton in just 8 years turned record deficits into record surpluses?

It's very similar to my question of how a small percentage of successful academic economists, like Greg Mankiw, can actually, at least on the record, be Republicans, with how academically discredited the bulk of their simple-minded economic ideology is. I've written some possible reasons for this in a recent post, and I'm writing up more, but one I'd like to mention is that when you've been a Republican for a while, in high positions, as Peterson has, you have some connections and influence in the party, and you may just feel that you can affect change better by staying on the inside.

This also may be one factor in Mankiw's staying with the Republican Party, at least on the record. It did allow him to get his job as Chairmen of the Council of Economic Advisers for Bush, and certainly he could argue that he could be more effective at influencing positive change to their horrible economic policies and ideology from inside, at that very high position, than from becoming yet another Democratic Economist criticizing from the outside.

Peterson, a Republican from before the extremist conservative takeover of the party 30 years ago, for his part has shown his unhappiness with the modern Republican Party, saying, "I remain a Republican, but the Republicans have become a far more theological, faith-directed party, not troubling with evidence." (from Robert Kuttner's December 27th, 2004 Business Week column, "What Killed Off The GOP Deficit Hawks?", available at: http://businessweek.com/magazine/content/04_52/b3914021_mz007.htm .), but he's chosen to nonetheless remain a Republican, and the reason might easily be that although he dislikes what the party has become, he feels he can affect change better from the inside.

[John V]

"(and we'd be more likely to get universal health care, something that could also help with the health care cost problem)."

How does that really help with costs in a truly real way? I'm all for the best solution that delivers the most bang for the buck and am still rather agnostic on a definitive solution but I can't really see how any perceived savings from universal care will offset the extra cost that an insulating system will put on the overall cost of care.

The biggest problem, as I see it, with our current brew of private and public woven system is that incentive structure encourages overuse of the system because the price mechanism is broken. "Insurance" has turned into "insulation" and prices have spiraled out of control. With universal care, this will only increase. The only way to keep such a system therefore from self-bankrupting itself is rationing by some measure devised by the government.

There's no way a universal system is going to maintain the advantages of our current system without fostering new disadvantages that we don't have. Something has to give.

I think principles like assymetric information and other highly specialized exception case theories are being overly embraced to justify something that is full of red flags in light the inconvenient realities we know to be true from cursory examination of market functions in terms of behavior, self-interest, incentives and price theory...AKA...the basic building blocks that shape and govern market exchange....whether it's about buying shoes, a car, car insurance, life insurance, a massage, a pizza or a pack of bubble gum.

How can a proponent of universal care gloss over all this? What is it that makes all this seem to not matter as much as I think it should?

Is it that the government is going to stop the current rates of use of many health care services and products? If so, how does it decide and for whom? Are we ready to stomach that fight?

These all seem like real concerns that we take for granted. We are where we are because of perverted incentives on behavior and a fight by interest groups to maintain the gains such perversions have given them. I don't see how this solves it. It simply seems like it's sweeping under the government rug so the problems will pop up later and we can then obfuscate why got there...even though it's clear right now why it will happen. A universal system will be taking over a system whose wealth of technology, choice and services it did not produce...(this is the good side of the current system)....what will the system look like once its richness is emasculated or altered from the "new rules"?

[Fred]

Anyone who simultaneously calls themselves progressive and also calls for fiscal discipline right now is either a lying shill or a fool. The true progressive case is for opening the fiscal floodgates wide right now, in the form of massive tax cuts on the middle class and/or massive spending on useful things (as opposed to useless things like wars). What we don't need is what we are getting, which is massive fiscal stimulus in the guise of monetary policy. Aka the Fed taking paper at par when the market value of that paper is way below par.

It will take many years of $2 trillion deficits to overburden the government with debt, and even then we can always turn around and stick it to the foreign devils by hitting them with a 99% tax on interest--I suspect that would be quite popular with the voters.

For every dollar of debt, there is a dollar of credit aka savings--this is a fundamental and indisputable fact of bookkeeping logic. Discouting the dollars owned by foreign devils, which can be repudiated, that means the only problem with massive federal debt is concentration of wealth in the hands of a few, and that issue has to be handled regardless of how much debt we have. Worrying about government debt should have gone out of style in 1936, just as the idolization of gold should have disappeared sometime in the mid 19th century, with the invention of checking account. Unfortunately, obsolete ideas have a way of hanging around forever in economics...

In any case, any fiscal discipline now will just open the door to fiscal undiscipline later. The sooner the system is fully loaded with debt (something like twice GDP), the sooner politicians will be force to confront reality and make hard choices and trade-offs.

[Bob]

This is all code for cutting programs that help the little guy.

When welfare reform happened corporate welfare didn't get cut along with welfare for the military and weapons makers.

The Bear Sterns bailout was a great idea but giving welfare to poor people will ruin their chracter. Massive tax cuts for the rich were a good idea but our cooked 5.5% unemployment rate "proves" a 13 week extension of unemployment insurance isn't needed.

Stockman told us that raygun wanted to run up the debt so that they could then use that as an excuse to cut social programs. Not to cut welfare for the rich.

If were gonna play a game of chicken then it's not gonna involve just one car. The other car is gonna contain the elites and their ass is gonna be heading for the cliff too.

[bws]

The core test of Peterson's credibility is whether he comes out and embraces taking "carried interest" as income rather than capital gains, and thus advocates a world where the PE industry titans pay their fair share of taxes - i.e. their fee income is taxed like other folks' fee income, not at a much lower rate. there is no way of reducing the deficit if no one wants to lose the tax breaks that they benefit from.

[Bob]

>> No,No,No. We don't have a SS, [...] problem

100% correct.

Lift the cap and SS is solvent for a long long time.

Apply that same principle elsewhere.

The rich have had it real good since 1980. Now it's time for them to pay something back.

Get those tax rates back up to the Eisenhower level and lets see how the books balance. After these freeloaders have paid their fair share then we can talk about what shape the budget is in.

[Jrossi]

robertfeinman and John V both make excellent points on HC. The medical/industrial complex is shot through with bad incentives--bad incentives that make a ton of money for a lot of powerful interest groups. I agree that change from a piecework payment system is necessary if not sufficient to control costs. Change to a better system will gore a lot of oxen. Can we get there from here?

[Bob]

>> 1. Eliminate for-profit health insurance firms
_____________________________________

http://en.wikipedia.org/wiki/William_W._McGuire

From the article -

McGuire's exit compensation from United Health, expected to be around $1.1 billion, would be the largest golden parachute in the history of corporate America.
______________________________________

Were gonna turn joe six pack upside down and shake the pennies out of his pocket while preaching adolecent Randian BS about how we can't tax those that are the supposed most "productive" members of society.

Thats makes sense.

[John V]

Jrossi,

"Change to a better system will gore a lot of oxen. Can we get there from here?"

I don't think so. As long as people keep ignoring the muddled truth surrounding what is good and bad with current system AND WHY EXACTLY it is that way along with ignoring the ALL realities of proposed changes, we will simply get nowhere. And, heaven forbid, we DO get somewhere, I doubt a sober assessment of the long term/short term consequences will be forthcoming.

[Dave]

Everyone should read John V's comment. Especially if you are in favor of more government intervention in health care.

http://economistsview.typepad.com/economistsview/2008/07/petersons-one-b.html#c122311868

[Fred]

I fail to see the problem with spiraling health care expenses. The developed world is always in danger of running short of aggregate demand and so we have to figure out some way to keep people busy, since idleness is a bad idea for many reasons, given the nature of our culture. I'd much rather we keep people busy on unnecessary health care than fighting wars, building pyramids, digging holes in the ground and filling them back up again, consuming plastic junk from China, etc. Education is another way to fill up the hour, but that is only practical for a small minority of highly self-disciplined people, certainly not for the majority of the boobs out there.

[robertdfeinman]

Just to set the record straight, we already have intrusive intervention in health care. Medicare/Medicaid set reimbursement rates for 7000 different services, but they don't tell you what doctor to go to.

Private firms (which the libertarians think are the answer) intrusively intervene in health care, only even more so. First, they deny coverage for pre-existing conditions. They are increasingly expanding the meaning of pre-existing, so don't be surprised if you can't get insurance at all.

Then they do tell you what doctors to see. If you don't go to one on their list they won't cover the cost or will only do so at a reduced rate. Then they have "formularies" or drug lists of what they will pay for. What is more intrusive than forcing you or your doctor to pick a drug because it is covered rather than one which is more suitable?

The idea that a government-administered program would be more intrusive than what private firms do now is just false.

Then there are the kickbacks. You can't bribe the Medicare administration, but many drug companies have deals with hospitals that give them "incentives" to use their products. In fact there is a whole layer of useless middlemen who do nothing but negotiate these deals.

As I stated above, the national plans of other developed countries are working fine, and for a lot less money. Why do these theoretical arguments continue when all that is required is to look out the window and see for yourself?

[john v]

fred, don't you think it would just be better to leave the matter of how we occupy our time to us and not to government officials? Useless or wasteful time and energy put into war or worthless busy work need not be the paradigm.

[paine]

"idleness is a bad idea... given the nature of our culture "
cryptic super structure couched
but deadly accurate fred

ours is a job ethic based culture
why ??
of course all the better to make a virtue out of
our jobbled majority and its thrall-dom

its nice and charcter building
to let a corporation or two
exploit you

[paine]

john v unmasked:

"don't you think it would just be better to leave the matter of how we occupy our time to ...the corporations ...
and not to government officials? "

[paine]

"social theorizing unhinged from economics is simply daydreaming"
or so cites
a brightly feathered birdy friend of mine

as both a karlist
and marx-i-millionite
i can hardly dis-agree

[Fred]

John V: as I noted, there are cultural problems with letting people do what they want with their time. The inevitable outcome will be degeneracy, as people choose idleness over labor. It isn't at all natural to want to own a big house or SUV or to be resentful that they can't have open heart surgery, etc. What is natural is to spend the whole day eating, drinking, taking drugs, having sex, playing sports, etc. The end result of letting people do what they want is a society that is militarily weak and hence ripe for invasion and takeover by a more disciplined society. This is what happened to the American Indians. The Indians couldn't understand why the whites were always working so hard. Then the whites exterminated the majority of the indians. Perhaps the indians who survived now understand the advantages of being work-obsessed. Similarly for the black Africans brought over here as slaves. Another culture that was less nose-to-the-grindstone work-obsessed than that of the Europeans and that paid the price.

Perhaps we have entered into a new age of permanent abundance, so that wars over resources are no longer necessary. But if not, then we would be very ill-advised to let ourselves become militarily weak. Military strength, in turn, requires a society which forces everyone to busy themselves in the formal economy. It doesn't matter too much what people do, as long as they do something, which is why useless health care is not a bad thing. A society organized around useless health care can easily be reorganized for warfare--biological warfare, in particularl. Whereas a society where everyone does what they want cannot be easily organized for warefare.

The above is the ultimate critique of libertarianism.

[paine]

fred

"Anyone who simultaneously calls themselves progressive and also calls for fiscal discipline right now is either a lying shill or a fool. The true progressive case is for opening the fiscal floodgates wide right now.."

u are out there leading the pack baby

toward the two trillion dollar deficit and beyond ..

let us boldly go where no babbitoid has gone b4

speaking of the babbitoids ..

we can leave john v
to play alone in his tar trap
muddled and perplexed
his mind
maybe blown to smithereens
by improvised explosive memes
of his own design

the only Rx for gunk dwellers
leave em far in the rear

[paine]

fred
sprouts doc swift
out of the barrel of a gun

[Bruce Wilder]

John V: "How does that really help with costs in a truly real way? I'm all for the best solution that delivers the most bang for the buck and am still rather agnostic on a definitive solution but I can't really see how any perceived savings from universal care will offset the extra cost that an insulating system will put on the overall cost of care."

What you are saying, as I see it, is that you favor the paralysis of analysis, and making the perfect the enemy of the good.

There are some pretty good answers out, that address your concerns. So, I'm wondering why you don't know about those answers, or, if you do know about them, why you think those answers don't address your concerns.

Answer No. 1 is experiential: other countries do better. Every other industrial country manages to achieve comparable or better health outcomes at a lower cost. They do so with a variety of systems or schemes, all of them, loosely, "universal". None of them are perfect, but all are, in broad terms, cheaper and either just as good or better.

The experience of France, Germany, Canada, Great Britain, Japan, Taiwan and other countries, suggests two things: 1. It is definitely possible to do cheaper, and quite possible to also do better; 2. while the policy details may matter to exactly how much cheaper, or how much better -- the question you, John V, pose can be answered without equivocation -- any of a variety of reforms would result in a system producing better outcomes at less cost.

Answer No. 1 can be pretty comprehensive, if you have the patience or need to dig into the details. You have to be willing to dodge the idiotic cherry-picking that Republican opponents indulge in (waiting times in Canada! like no one waits in the U.S.) And, of course, the highly idealized accounts of some proponents are not helpful, either. But, the answer to your actual question is that universal care can be the framework within which systems are designed and managed that are cheaper. The experience of every other industrialized country proves it. Cheaper is possible within a univeral framework, even when the policy details vary, regarding consumer choices and the lavishness of budgets and resource allocation.

There are some other useful answers, which are more analytical, and point in the same direction. One, which is repeated very often, and for good reason, is the high percentage of administrative costs. The American system of medicine allocates a lot of resources to administrative costs and to insurance and billing processes, which are not productive, and are sometimes actually hostile to quality of care. The simple fact that a significant fraction of the population has no, or inadequate, insurance, creates medical nightmares mirrored by administrative and financing nightmares, when institutions must provide care, and, also, for obvious economic reasons, must find ways to avoid providing care.

Another analytical point in favor of universalizing reform goes directly to the "insulating" problem you pinpoint. The U.S. insurance system has tended to let costs ratchet upward, contributing to health care cost inflation. A more universal system can be structured as more of a monopsony, in which a single, or a few large payers, either dictate the prices, or bargain very powerfully. The effectiveness of doing so can be seen in the experience of other countries with universal health care, as well as in the experiences of the Veterans Administration and Medicare and large private HMOs like Kaiser, in the U.S.

When our existing system provides poor to mediocre performance at very high cost (and with a rate of cost inflation that threatens to bankrupt business and government), why shouldn't we try something, anything? Why remain paralyzed in a clearly mediocre (in health outcome performance terms) and deteriorating system?

We should try reforms. The examples afforded by the experience of other countries suggest that more than one approach, within an universal framework, can be successful.

We could try and make some mistakes, which we can correct; we have the ability to imitate success elsewhere, which would make the probability of some considerable degree of success more certain. We could not try and that definitely would be a mistake.

[paine]

strawberry alarm clock economics at its best

"(the)...incentive structure encourages overuse of the system because the price mechanism is broken"

now john v
just to keep things as clear and quantificated
as possible
EXACTLY
what part of
our present semi private system's world record cost per capita does this broken price system explain ????

[Bruce Wilder]

Fred: "A society organized around useless health care can easily be reorganized for warfare--biological warfare, in particular"

Genius! Not since Eisenhower went to Kansas (the heartland of Repubicanism) to announce the National Defense Highway System (aka the Interstate) have I heard such political genius.

This is great. We need the discipline of National Health Care, to breed and keep the healthy soldiers of tomorrow. The National Defense Health Clinics Act of 2010 -- has a nice ring to it!

[paine]

my father
a great one for price rationing
thought he could cut down on his family over eating
by charging us all for breakfast and dinner
on a very rigid piece by piece system
my younger brother god rest his soul
didn't make it to our final weight check
his piggy bank wasn't big enough to pay his full way

even though on non school days
and on weekends
we had a free lunch

[2slugbaits]

Wow. After reading some of the comments I had to check to make sure I was actually tuned into a blog that is ostensibly about economics. I see a lot of left wing free lunchers out there that are every bit as reckless as the Bush goons on the far right. I came out as an Obama supporter early on, but I don't expect the waters to part and the skies to open the day he takes office. Bush has driven the country into the ditch and our choices over the next 4 years are going to be very constrained...to put it mildly. We need new infrastructure spending, but we've also got a hell of a debt sitting out there thanks to Team Dubya. Yes, there's some economic slack out there, but not enough to soak up all of the grand plans that some here seem to be expecting. War spending is still going to be with us for awhile even if Bush started withdrawing troops today. We need to learn how to settle for diminished expectations. If Obama can wind down the war inside of 2 years, enact something that looks a lot like universal healthcare, put the budget on a balanced budget glidepath, and restore the Clinton tax rates on the wealthy, then I'll be tickled pink. Call it a good four years work and re-elect him.

A lot of Peterson's specific proposals are half-baked, but I don't think that's a reason to dismiss him and the Concord Coalition folks entirely. They're wrong about Social Security (at least for awhile...we'll see what happens to productivity growth), but they're not wrong about the bigger picture. I'd like to co-opt Peterson and the Concord Coalition folks to emphasize how reckless McCain's tax cuts really are. Those of us on the left don't do ourselves any favors when we criticize McCain's support for tax cuts as being fiscally irresponsible and then turn around and call for all kinds of new unfinanced programs. Dick Cheney was wrong when he said deficits don't matter. The left shouldn't repeat that mistake.

[Jon h]

"Similarly for the black Africans brought over here as slaves."

Ah, those damned shiftless lazy blacks. It's their own damned fault. If they'd been proper Calvinists, boozing in pubs and hanging about in coffeehouses like the English, or fopping around in powdered faces and wigs like the French, they would have been okay.

[paine]

2slug
beware
u may not be a realist after all
but one who pays twice for what ought to be
a free lunch

lets agree u don't want
to get caught
smug-ly meowing at us thru jail bars...
a prisoner of your own ignorance

ps on a less rollish note
it might help to read some late bill vickrey

fred's hero
nobel winner
and
possible victim
-- too shortly after his awarding ---
of a successful wall street pre-emptive hit

[Fred]

BruceW: I'm surprised you're surprised by this sort of thinking. The Republicans have left the door wide open to the Democrats to use "national security" to justify all sorts of programs. For example, a more equalized distribution of wealth tends to causes people to see themselves as being in the same boat rather than different boats, and thus a progressive tax system is a matter of "national security". Obviously, a government managed alternative energy program is a no-brainer National Security issue. A more indirect approach is to recognize that the land forces (Army, Marines) are pretty much obsolete at this point, since they can't be used full strength against petty opponents (for public relations reasons) while they are hopelessly ineffective against major opponents (China, Russia). But the country thinks highly of the land forces. Very well, reorganize them as a national job training corps. Similarly for the surface Navy, which is also obsolete. Ditch the carriers but keep the technical training programs, which are excellent. Give the brass all the money they want, as long as they agree to put it to work training young people rather than fighting wars. Dress the whole scheme up in national security colors to get political support. Etc, etc.

Demogoguery against "foreign devils" is also a great line at this point (which is why I keep repeating that term, though I certainly don't advise real politicians to use it). For example, whip up some hysteria in Kansas about Arabs buying up all the farmland, in order to justify a 5% tax on real-estate not owned by American citizens (some provision for a pass-through land trust would have to be made for church property, to avoid political opposition from that crowd--that is, pass the ownership of church property to the American citizens who run the church). More screaming about foreign devils bleeding us with interest payments to justify a hefty tax on dividends and interest, unless paid directly to American citizens. Together, these new taxes will have the same effect as a big tariff, in that foreigners would be penalized if they try to save their dollars (in the form of stocks, bonds or real-estate) rather than trading them for goods and services. The final result will be to stop all the demand leakage due to our trade deficit, so that we don't have to run such enormous budget deficits to make the economy run at full speed.

2slugbaits: let's go through this real slow so you can understand. For every dollar of financial savings, there is a dollar of debt somewhere. There is no disputing this fact, since it is simple bookkeeping logic. If people want to hold large amounts of financial savings, and they do, for various reasons, then the only way they can do so is for someone to run up large amounts of debt. We are approaching a monumental changing of the tides. Households have been using asset price gains on their houses to substitute for savings for income. As households begin to shift to a higher savings rate (and oh boy will they ever in the near future), then someone has to start running up a debt to accomodate this desire to save. Businesses are in no mood to run up more debt, nor are the East Asians or Europeans. The third world would like to run up debt, but no one is going to lend to them at this point. So that leaves either the government as a willing debtor, or corporations as unwilling debtors. Unwilling means that corporations run unexpected losses, which causes them to start laying off employees, which causes increased savings by households due to fears of losing one's job, and so we spiral into depression. Thus the government must pick up the slack by running bigger deficits. This is the situation analyzed by Keynes in 1936. Read the General Theory and then reread it again and again until you understand it. Keynes does mention another possibility. Which is for the price level to drop sufficiently that existing household savings effectively increase their real (as opposed to nominal) value. This is known as the Professor Pigou solution. Hyman Minsky, in his reevaluation of Keynes, calls it Professor Pigou's "trip through hell", because that is what it is. Something like 5 to 10 years of grinding unemployment and bankruptcy as prices slowly work their way down. If you are a cash-rich rentier, with all your money in government bonds, then I can understand your wanting us to take this path. Otherwise, it makes no sense whatsoever. It is also politically unrealistic, so I don't know why you and the other Austrian take-your-castor-oil types bother seriously proposing it. Ain't gonna happen.

[paine]

"Yes, there's some economic slack out there, but not enough to soak up all of the grand plans that some here seem to be expecting "

how tell u so
mein fearless leader ??

then again at least you grasp
the notion of slack
u give us a toe hold....

[paine]

btw

why in hell must we weebly
job smurfs be realists

art of the possible types

when we know damn well the car can hit 90
we gotta get to the meeting on time
or lose out
and we're late
why not scream
"put the pedal to the medal gretel "
even if we also pretty well know
she won't listen to us

[Dick Chaney]

Reagan proved deficits don't matter, so stop worrying.

[John V]

WOW, Fred.

And you're serious too. I mean really, you're quite the autocrat.

"The above is the ultimate critique of libertarianism."

Or the complete of antithesis of libertarianism in every way imaginable. Remind me to run for the hills if you're ever dictator.

[2slugbaits]

Fred,

I've already read the General Theory. It's a very badly written book. The economic environment is not good, but it's not the Great Depression either...or as Mr. Keynes would have called it, "The Great Slump."

There's plenty of debut out there right now. That's the problem. It will take lots of taxes to pay down that debt. As the govt services the debt income will be transferred from taxpayers to bondholders. Unless the bondholders bury the money down some forgotten mine shaft, there should not be any loss in aggregate demand. So I don't think the downstream concern is insufficient aggregate demand. The problem is more likely to be low productivity growth accompanied by low real income gains.

paine,

If Obama can accomplish more than the things I mentioned, then I will be overjoyed. But I won't be disappointed if that's the best he can do. He's running for President, not Miracle Worker.

[Fred]

John V: you didn't respond to my critique. What exactly is the libertarian answer to foreign military threats? Pretend they will just go away if we promise not to bother other people? I'm interested in reality, not fantasy. Reality (the study of history) says that military threats are real and preparation is the best defense. "If you want peace, prepare for war." In the context of modern warfare, preparation is more about technology, production and distribution systems, and social organization than about big standing armies.

[Sandman]

LOL, Calvinism was breeded from the Talmud not the Christian bible, which they butchered. Hence, it explains the failure of America. Pam Anderson could put on a Nazi uniform and damn the Jews, but she would still be closer to a Jew than a German in her lifestyle mannerisms. Calvinists have no excuse. You are what you are.

Capitalists are by nature.........gypsies. They have no home or location they can call their own so they jump from area to area(now country to country)doing their merchant businesses.

Hence, something the libertarian can't understand. Since they believe in gypsies and other international beliefs, they has no sense of country or the common stuff we share as a country. Intellectually, they are degenerates, much like the Marxists who believed in that same anti-social behavior coming from a different direction.

We must get rid of intellectualism and go with rational,results oriented society based of efficiency, efficiency and more efficiency.

American capitalism is a slobby ideology that has long met its maker. Time for America to get the picture and clean up its act. Take in common what the country share(healhcare,energy,defense,education) and let the capitalists fill in the goods.

FWIW, the reason the Indians got killed by the white man was because they had inferior technology. They were as hard working as they come and is a big reason they were able to hang around for so long. The fact is, their way of life was inferior to the white man's hence they heavily killed off. Yet, the ones that survived have enjoyed a greater quality of life far greater than their primitive ways.

The fact the free market internationalists try to put it down as "work effort" is embarrasing.

[John V]

Bruce,

thanks for your comments. It would have more enjoyable to read without the condescension and labored partisan jabs for its own sake. (Trust me, I don't care. Bash the GOP all you want. It's just a little cheapening and distracting.)

But anyways,

"There are some pretty good answers out, that address your concerns. So, I'm wondering why you don't know about those answers, or, if you do know about them, why you think those answers don't address your concerns."

Because, like I said:

"I think principles like assymetric information and other highly specialized exception case theories are being overly embraced to justify something that is full of red flags in light the inconvenient realities we know to be true from cursory examination of market functions in terms of behavior, self-interest, incentives and price theory...AKA...the basic building blocks that shape and govern market exchange"

That implied that I have read about it and do understand. I simply see a disregard...or at least an unserious concern...for more elemental forces and the long term consequences.

Yes, other countries have done it and they are not without their own problems. Let's not be overly charitable. I know you can do that. Costs are coming under pressure and it's a real matter of concern for their governments. Nothing's free.

One point that cuts deep:

"The U.S. insurance system has tended to let costs ratchet upward, contributing to health care cost inflation."

Statements like this strike me as almost coy...as if you hooping I don't see the gaping hole it as you tiptoe by with it.

Ask yourself why and examine the context of it. I don't see how this would be any different in a government system. The difference in the government system is that the cost pressures will just get lost in the total budget with more deficit spending and nobody will care. Either that or the government is going to have to start throwing its weight around and ration...somehow, some way...to keep costs down.

Don't get me wrong, there are numerous problems with our current set-up. But don't think it's just because it was left to its own devices...far from it.

"A more universal system can be structured as more of a monopsony, in which a single, or a few large payers, either dictate the prices, or bargain very powerfully."

Yes. True. And that will come at a cost in other ways down the road. I either see our pharamceutical research slowing down dramatically or subsidies to big pharma going up and up.

Thanks again.

[Lee A. Arnold]

I'm guessing Peterson's one billion is another attempt to secure the political goal of evacuating the Social Security Trust Fund into the Bush Tax Cuts. See

SOCIAL SECURITY
http://youtube.com/watch?v=Tts2uTWt6e8

BUSH TAX CUTS
http://youtube.com/watch?v=SA1f2MefsMM

Because if we let those tax cuts sunset as they are currently scheduled to do, institute universal baseline medical care to eliminate some private insurance costs, end socialism for the rich, and reduce military spending as the jihad winds down, THERE WILL BE NO FISCAL CRISIS. It's all nonsense.

[John V]

Paine,

just to keep things as clear and quantificated
as possible
EXACTLY
what part of
our present semi private system's world record cost per capita does this broken price system explain ????

Are you
serious?

Or are you looking for
reasons to
tap keys
?

If you can't
understand (or don't
care to
admit you
understand) the fundamental role
of prices in markets,
perhaps you
should put down Das Kapital
and pick up an
intro to
economics
book.

[Fred]

2slugbaits says: There's plenty of debut out there right now

There WAS plenty of debt, until house prices and the stock market started crashing and commodity prices shot up. Household wealth is now much lower than it was a few years ago, especially as measured in real terms. The natural result will be a savings spree. No, we are not in a Great Depression, because we now have Big Government. But we are facing the same situation as the Great Depression, and Keynes is more relevant than at any time since the 1930's. (You may have read Keynes, but you didn't understand him.)

In any case, we almost certainly WILL get more government debt. just look at the bailout proposals coming out of Congress--the political mood is clearly for spending whatever it takes to avoid depression, and not for fiscal austerity. The only question is how we get more debt. Do we run up this new debt by letting the Fed buy paper at par when the market value is less than par, together with FDIC and pension and other bailouts? Or do we run up the debt in some other way, like a middle class tax cut, a national health care system, a national job training system, etc?

[Lee A. Arnold]

John V -- Asymmetric information is hardly a "highly specialized exception case theory." It is in fact nearly ubiquitous, except in the case of buying bubble gum, and it is a major reason why your "more elemental forces, " a.k.a. one-equation classroom syllogisms, are highly provisional and hardly preeminent with regard to reality. But wait until you get to the economic effects of the reduction of non-monetized space-and-time transaction costs, endemic to institutional settings of every type. Universal health care could in fact cause growth in indicators of well-being larger than GDP -- and also cause growth in GDP.

[MG]

"There WAS plenty of debt, until house prices and the stock market started crashing"

Actually, the debt's still there, it's the asset values that are gone. Suppose, households reduce consumption to pay off the debt, and the foreign devils invest in manufacturing to take up the slack in agg demand and fix the current account. Would that work?

[paine]

"a national job training system "

i like the sound of that

better then community college uber alles

its danish right fred ???

[paine]

"pick up an intro to economics book "

grand thought john v ...will do....

have u a suggestion ???

[Fred]

households reduce consumption to pay off the debt

Government debt = private financial credits = private "savings". (I put savings in quotes because that word is so misleading.) If households stop consuming, then businesses lose money. So that will increase business debt while increasing household savings. It will have no effect on government debt, or possibly increase government debt due to reduced tax receipts and increased government spending on things like unemployment as businesses start laying people off.

MG: I would recommend Keynes, but you wouldn't understand him. Instead, just keep playing with the notion that debt is the flip side of credit, and credit is another word for "financial savings". To increase financial savings (as opposed to equity savings, like stocks and houses, or non-monetary savings, like education, work history, social networks, etc) means to increase debt. The more households save, the more someone else (government or business) must run up debt. And vice-versa and conversely.

[Fred]

paine says: its danish right fred ???

I don't understand the reference.

[paine]

the danish flexicurity system
is considered world class by social marketeers
it has a very deep jobs program

[paine]

fred is of course completely right

some body has to borrow all that
tax cut produced saved shit

if mr and mrs householder
now can't borrow much of it
cause of tightening credit constraints

then its uncle's time basically
that is if we desire to
maintain our tepid macro gestures
toward non violence provoking
employment rates
and close our non oil trade gap
with substitution effects
not income effects

(just learned about those in a intro text
john v's advice is already baring fruit)

[MG]

Ah yes, Keynes, General Theory,C+I+G, it's all coming back.

Right now foreigners are saving (not importing as much as they export). So if they saved less, boost tangible investment or imports, wouldn't that offset increased household savings (or lower net borrowing) without increased government borrowing?

[Fred]

Sure, foreigners saving less (smaller trade deficit) could completely offset increased household savings, so that no new government debt was necessary. I doubt this will happen in reality, but it is certainly theoretically possible.

[paine]

the plunging dollar export boom right mg
that's the ticket ...eh ??

substitute substitute
more exports less imports
get that law of markets
working for us not agin us

again..thanx john v

[Dickeylee]

Obviously, Fred's already got his, and screw the rest of you. the Republican mantra, screw you, I've got mine.

[MG]

Plunging dollar or Fred's tax on foreign savings. I'm OK with a bigger gov't deficit too if needed.

[mrrunangun]

The last time we had the opportunity to enact a truly progressive agenda was in the mid 1960s. The country was a creditor to the world then and had the only still intact industrial plant in the world. We could have Medicare and Medicaid and the war on poverty and fight the vietnam war all as parts of LBJ's Great Society. We didn't have to worry about other countries financing us. We could finance ourselves.
The country's position in the world has changed and continues to change for the worse. The rest of the world must buy or goods or our bonds or our productive capacity if we are to further increase our increasingly debt-financed government programs. We disdain politicians who tell us we have to make choices because we have been able to avoid hard choices for so long. The rest of the world is getting into a position in which our freedom to accumulate debt will no longer be unlimited. Once we are in such a state,hard choices will be forced upon us. Universal healthcare,an infrastructure jobs program? This plus tax increases is the heart of the progressive program for the incoming Obama administration. This was realistic in 1965, but maybe not in 2009.

[Ryan]

The logical fallacies being commited here are outright criminal.

Supporting one candidate over another, is by no means an endorsement of every opinion they hold. Conversely, supporting someone over another doesn't imply that candidate agrees entirely with you; just ask Phil Gramm.

[Farrar]

What a pleasure to see that John V's running stream of BS with its notable lack of specifics has been effectively silenced by one with some real economic knowledge!
Thanks, Lee Arnold.

[chris]

The first line of attack on drug companies should be to ban their TV ads that incite patients to demand their drugs from doctors. It's an outrage and it is costly. The ads are not "infomrative", they are designed to expand the market illegitimately. Doctors know what drugs their patients need; patients don't and shouldn't be encouraged to think they do.

[Ryan]

"Asymmetric information is hardly a "highly specialized exception case theory." It is in fact nearly ubiquitous, except in the case of buying bubble gum"

Quite a charge; I'd be interested in knowing how you define asymmetric information.

[James Kroeger]

Fred:For every dollar of financial savings, there is a dollar of debt somewhere.I like the emphasis Fred is putting on the relationship between savings and debt. I've pushed the same point when I've attempted to explain how/why it is possible for us to 'unwind' America's excessive indebtedness crisis without throwing the economy into a recession. If is is agreed that the US government has borrowed too much and that households have borrowed too much and that firms have borrowed too much, then doesn't this also mean that we have also been saving too much?

Let's just assume a closed economy for a second. If total borrowing in our economy was actually reduced by the choices of firms/businesses/households, then there would be a contraction of aggregate demand if savings levels remained constant. Money would continue to be removed from the economy, but less of it would be returned to the economy through borrowers. This is why we say that the economy is addicted to debt, all else equal. IF we wanted to reduce the total amount of borrowing in a closed economy, then we would have to also want to see less money saved, or else the economy would contract.

The practice of saving money is not a 'pure good' that an economy can never experience too much of. Whenever there is any level of unemployment, we can know with certainty that there is too much saving taking place. When there is unemployment, the last thing we should want to see is more money removed from the economy. So if we can convince Congress and households and firms to borrow less, what are we going to do to return some of the money back to the economy that is being removed by savers? The answer is TAX THE HELL OUT OF THE NATION'S BIGGEST SAVERS.

Doing so would take money that was removed from the economy by the biggest savers and put it back in---sustaining aggregate demand---through big increases in public investment in infrastructure, human capital, universal health care, etc. Not only would we be able to sustain aggregate demand at a time when debt levels are being reduced, we would also be doing so in a way that increases levels of REAL ECONOMIC INVESTMENT in our economy. There really isn't a downside here.

Practically speaking, raising tax rates on America's richest citizens is the only thing the government can do to maintain full employment while everyone is borrowing less. (Exception: if savers were to start saving less and start spending more, then the govt. would not have to collect that money in taxes.) Contrary to what many in the financial services industry are trying to say, the solution to our indebtedness problem is NOT for us to start saving more money, but is actually for us to start saving less in order that we be able to borrow less without ruining the economy.

(Open economy considerations: Understand that when foreign bankers et al. lend money to American governments/households/firms, they are actually lending DOLLARS that never left the American economy. The Chinese are not lending money to the Treasury that was not already in the American economy in the form of loanable reserves that were available to American consumers/govts./firms. In order for the PBOC to buy treasuries, they obtained dollars that were removed from America's economy by savers and was being held by banks in the form of unlent reserves. So in other words, although our government has 'borrowed from China' to finance its debt, that money never really left the American economy...and never will [unless the Chinese decide to give Renmimbi to US importers for dollars that they then just stash away in an inactive account].)

[John V]

Farrar,

Silenced? What do you think? That I have this page open at all times to respond right away to everything?

Ryan,

"Quite a charge" is right. Moreover, such notions like assymetric information, while valid, hardly provide a strong argument for action whenever and where ever they are shown to possibly have an influence.

[John V]

Fred,

There's little to respond to. Your argument borders on strawman. You assume that the default position in your target is extreme total inaction. Not true.

That screed you gave above that was supposed to be critique of libertarianism is nothing more than the caricature of over-active, autocratic busy body.

And BTW, a study of the history of war reveals quite a bit. You seem to be filtering it to see what you want to see. But if your premise is that I oppose any type of military action under any circumstances and am naive enough to believe that no defensive preparation is needed, then you are wrong from the outset and simply swinging fruitlessly at strawmen.

Your seemingly total lack of faith in free people to peacefully and purposefully self organize around strong institutions reveals something well beyond hostility to an extreme...almost fictional...view of libertarianism. It also seems to reveal hostility to any whiff of the libertarianism that does truly exists in liberalism and conservatism.

[Fred]

JohnV: Originally, you stated that people should be left to do as they please with their lives and money. I respond that the inevitable consequence of that is military weakness. Then you backtrack and say you don't really want people to be left to do as they please, insofar as this affects national defense. Well, you've changed your original position. I was attacking your original position, not your changed position.

The idea that people will spontaneously organize strong institutions is true, and the government is precisely such a strong institution. Sounds to me like you've backtracked here also, from opposing big and strong government to supporting it, as long as that is what the people want. As a democracy, surely our strong goverment meets this criterion of being what the people want.

Finally, you are the one is who is getting somewhat hysterical here. I am an AUTOCRAT because I don't see exploding health care spending as a major problem? WOW indeed.

Here's some thoughts about why you are reacting hysterically. Libertarianism is inevitable when a society goes from an environment of scarcity to one of plenty. The old social codes are still being taught, and most people still follow those codes, but these codes are no longer being enforced strongly, and this opens the door to parasitism. Unlike the sociopath, who accepts himself as a parasite, the libertarian still yearns for social approval. But what an absurd contradiction! How can one expect social approval for behaving in a way that tends to undermine society? This internal contradiction is the explanation for the hysterical behavior of libertarians when pressed on their weak point, which is national defense.

If the environment of plenty lasts long enough, then everyone will start acting like a parasite, and that would normally tend to destroy the environment of plenty. But perhaps we have entered the "singularity" and robots will take over once the humans quit working, so that the environment of plenty can last indefinitely. I have my doubts about this, at least for the next 50 to 100 years, which is why I am certainly not interested in having the United States turn into a defenseless hippie commune ("wow, man, bummer that everyone decided to invade us") in my lifetime.

[Fred]

JohnV: Originally, you stated that people should be left to do as they please with their lives and money. I respond that the inevitable consequence of that is military weakness. Then you backtrack and say you don't really want people to be left to do as they please, insofar as this affects national defense. Well, you've changed your original position. I was attacking your original position, not your changed position.

The idea that people will spontaneously organize strong institutions is true, and the government is precisely such a strong institution. Sounds to me like you've backtracked here also, from opposing big and strong government to supporting it, as long as that is what the people want. As a democracy, surely our strong goverment meets this criterion of being what the people want.

Finally, you are the one is who is getting somewhat hysterical here. I am an AUTOCRAT because I don't see exploding health care spending as a major problem? WOW indeed.

Here's some thoughts about why you are reacting hysterically. Libertarianism is inevitable when a society goes from an environment of scarcity to one of plenty. The old social codes are still being taught, and most people still follow those codes, but these codes are no longer being enforced strongly, and this opens the door to parasitism. Unlike the sociopath, who accepts himself as a parasite, the libertarian still yearns for social approval. But what an absurd contradiction! How can one expect social approval for behaving in a way that tends to undermine society? This internal contradiction is the explanation for the hysterical behavior of libertarians when pressed on their weak point, which is national defense.

If the environment of plenty lasts long enough, then everyone will start acting like a parasite, and that would normally tend to destroy the environment of plenty. But perhaps we have entered the "singularity" and robots will take over once the humans quit working, so that the environment of plenty can last indefinitely. I have my doubts about this, at least for the next 50 to 100 years, which is why I am certainly not interested in having the United States turn into a defenseless hippie commune ("wow, man, bummer that everyone decided to invade us") in my lifetime.

[Fred]

sorry about that double post, something wrong here.

[John V]

Fred,

I think you need to read what's there and not push meanings to furthest extremes.

[John V]

Fred,

the only reason you see shifting positions is because you were wrong on your extreme reading of my views in the first place.

[Lee A. Arnold]

Ryan, Asymmetric information is defined in the usual way. It is ubiquitous, because you don't know what's in the bubblegum. It is taken care of in various ways: consumer information on packaging, right-to-know laws, principal-agent contract protections. These all amount to paying some kind of transaction cost: search & information, bargaining, enforcement. Sometimes these transaction costs are even non-monetized, and so sometimes they are ignored unjustly.

Asymmetric information would ALWAYS provide an argument for some type of action within economics, because with market failures you can't prove Pareto optimality, so therefore your liberty might be harming others in the aggregate. (I don't buy that, but beware the people who want it both ways, for their own ideological reasons.) I believe John V is therefore incorrect, although the remedy, at least with regard to consumer goods, may be minor.

Asymmetric information is brought-up in medical care for two reasons: because insurers can't tell whether applicants are lying about pre-existing conditions, and because the insured rarely have the expertise to tell which choice of policy is the best. These are overcome in different ways, composing more transaction costs, and composing the principle business of medical insurers.

Or they can be overcome by ending them: make asymmetric information and its transaction costs into non-issues. Getting private medical insurance out of basic care could save (I am guessing) 10%-20% of the fiscal shortfall touted by the alarmists. As well as 10-20% of doctors' time lost dealing with insurers.

Since almost all people believe that medical care should be a uniform product unlike cars or televisions, that it should be a human right not a market privilege, and that doctors and nurses start-out with a game-theoretic altruism although it is lost on a few of the rest of us, then the remaining real problems are how to incentivize innovation and how to allow profit-making by private suppliers to the system. These problems should be surmountable, and of course the whole system should remain transparent and remediable like any good institution.

In the abstract sense, you could also make the case that asymmetric information is the underlying mechanism of some other market failures, such as monopoly, environmental externality, free-riding and public goods. This is stretching the definition of course -- but certainly these are problems of information and pattern, not pure matter-energy results.

[John V]

Lee,

This is the heart of the matter for me:

"Since almost all people believe that medical care should be a uniform product unlike cars or televisions, that it should be a human right not a market privilege, and that doctors and nurses start-out with a game-theoretic altruism although it is lost on a few of the rest of us, then the remaining real problems are how to incentivize innovation and how to allow profit-making by private suppliers to the system. These problems should be surmountable, and of course the whole system should remain transparent and remediable like any good institution."

First of all, I think the sense of "uniform" here makes no sense. Nothing is uniform. A variety of factors, like for any other good, make "uniformity" not only impossible but undesirable. I see every reason in the world to avoid such impossible goals. It will backfire. Choice, differentiation, clear feedback and adaptation work better and always have. It's a shame we inhibit this in our current system.

Secondly, it's funny how you call it a "market privilege" as if markets won't deliver. Necessary goods, however complex, in the market seem to have a way of finding their way to consumers. Yes, some things like auto-insurance justly forced onto the consumer and for good reason but the affordability of it through choice and differentiation make the obligation easy to comply with. If auto insurance had all the perversions and market function contraints, economically speaking, of health insurance, it would have the same problem and costs would skyrocket making what we take for granted in car insurance impossible.

Basically, the self-justified over-reaction to possible problems in health care has compounded over the years to create this mess. Poorly conceived ideas have pushed us further and further away from better...NOT PERFECT...results at nearly every stage. The monster we have is the result of this. Every little facet of health service from how doctors operate to pharma operates have all morphed into what they are as a result of poorly coaxed incentives and the subsequent conditioning it puts of consumer behavior and expectations. This is why I said earlier that

such notions like assymetric information, while valid, hardly provide a strong argument for action whenever and where ever they are shown to possibly have an influence.

and even earlier when I said that such a cavalier embracing of principles to justify seriously involved action:

is full of red flags in light the inconvenient realities we know to be true from cursory examination of market functions in terms of behavior, self-interest, incentives and price theory...AKA...the basic building blocks that shape and govern market exchange

The second half of your quote, again, takes for granted that we can create artificially the conditions that:

incentivize innovation and how to allow profit-making by private suppliers to the system.

This is just the tip of the iceberg. I genuinely don't see have this is surmountable in a real way that leaves the long term prospects of the realities it will create healthy and able to do what we want.

[Lee A. Arnold]

Your idea is that things would be better, if only we pushed them a little further in the direction that has helped to create the mess! But I doubt whether you will convince many people that market economics is the pure solution, here. Healthcare is NOT having exploding costs because the market has been inhibited from reducing the costs. Healthcare is having exploding costs because (1) medical technology is advancing and changing rapidly, and (2) the immediate market solution to reducing those costs, i.e. reducing demand for the services by high prices, is morally repugnant. Right now the markets aren't delivering healthcare to everybody who needs it because they don't all have the money for the insurance. Auto insurance is a good example: it's not priced as high as health insurance, yet many people are NOT carrying enough coverage. And they don't need to carry auto insurance for their young children too. On the other hand, the provision of basic services could be expanded to those who don't have it, under a different economic structure, and save us all SOME money by cutting-out the middlemen. Throw the medical insurance industry overboard. They gamble the money on Wall Street and are probably in the sub-prime crisis up to their necks. Are the taxpayers indirectly bailing them out, too? The original question was the fiscal outlook. We are talking about a good where everybody wants the same service for everybody. Basic medical care is uniform like toilet paper or streets and roads. Of course there's innovation and what we can have is a panel from NIH and AMA to approve new techniques for acquisition. Could this be gamed? You bet! But the greatest danger I see in universal coverage is that politicians wouldn't leave it alone, would tend to cut its funding, would tend to get their own clowns on the NIH panel. Right now, the government is paying more to the private insurers to cover Medicare beneficiaries than it would cost to put them in a public plan. It's already being gamed, and the market won't fix it. The solution is a tightly focused institutional structure with transparency. Clear feedback, differentiation, and adaptation are possible by other institutions besides markets. Economics covers more than markets.

[John V]

Lee the key that either supports or undermines your entire post above is right here:

"Your idea is that things would be better, if only we pushed them a little further in the direction that has helped to create the mess! But I doubt whether you will convince many people that market economics is the pure solution, here. Healthcare is NOT having exploding costs because the market has been inhibited from reducing the costs. Healthcare is having exploding costs because (1) medical technology is advancing and changing rapidly, and (2) the immediate market solution to reducing those costs, i.e. reducing demand for the services by high prices, is morally repugnant."

Firstly, nowhere did I ever talk about pure solutions on any level. I'm talking about necessary components to good solution.

As for the bolded part, you're going to have prove that one because a failure in market function is A HUGE PART as to why costs have skyrocketed. Yes, new technologies are expensive. I understand that. But if you are going to sit there tell me that the obvious is not true, then I have no choice but to ask you show me why.

I think everyone should have a new top of the line Lexus, BMW, Infiniti, Mercedes or whatever delivered to their 4,000 square foot home once per year through luxury insurance. Now you tell me why in this ridiclously crude example that that $65-85,000 car isn't going to costing insurance providers $200K or more within a few years and that premiums will go through the roof.

Yes. It's not the same and I shouldn't even be comparing but it's plainly obvious in my crude and rude analogy that costs will skyrocket.

You the market alternatives to lowering cost by denying service to make the price drop is repugnant?

First of all, you have no way of knowing exactly how prices would drop. It's clear that they would. Again, leave the "that's not the same thing" argument aside for a moment but many medical procedures that insurance doesn't cover like lasik surgery have seen prices drop dramatically.

[Lee A. Arnold]

John V, why don't you back up, and explain in 100 words or less exactly how you think the market is not working in medicine, and how that would be fixed. Speak to the actual circumstances. Do not use the airy generalities that markets must always be better. That is not reasoning, it is theology. We've already heard it.

And you are starting to use terms in a way that contradicts your previous statements. You began by saying that asymmetric information, which is categorized in economics as one of the market failures, is not significant. Now you write that market failure is a "HUGE PART as to why costs have skyrocketed."

The reason for this contradiction is because you appear to be misusing the term "market failure." Market failure is NOT defined as "a failure to apply markets." Market failure is a regular malfunction within normally-functioning markets, and it is found nearly everywhere. The regular categories of market failure are: (1) monopoly, (2) positive and negative externalities, (2) nonprovision of public goods, (3) asymmetric information.

If any of these exist, which is just about always!, THEN THE MARKET IS NOT EFFICIENT --i.e. its results can be improved upon. Whether or not that improvement is to be a further mechanism added to that market, or something else like government intervention, is to be decided anew in each case, -- and that solution may change over time.

(Some people would add: (4) present-to-future resource misallocation, (5) business fluctuations, and (5) unequal distribution of income, to the list of market failures.)

But the real question is how much can be gained by taking the insurer's profits out of it, reducing the windfalls that Congress handed Big Pharma, eliminating the time that doctors have to spend on the phone with insurers, eliminating the transaction costs that people must pay in dealing with the present system, and eliminating the burden all of us pick-up to pay for people who aren't covered. I would argue that universal coverage is a "public good."

[John V]

No, Lee, you back up little further and explain YOURself. OK?

You said it. (see bolded quote in previous post) so explain why it isn't so. I think my answer provided is sufficient at this point.

And you are starting to use terms in a way that contradicts your previous statements. You began by saying that asymmetric information, which is categorized in economics as one of the market failures, is not significant. Now you write that market failure is a "HUGE PART as to why costs have skyrocketed."

Hehehe. Not at all. Go back and reread exactly what I said about assymetric info and see how it squares with how you paraphrase it. On the "failure in market function" is what I said...not "market failure". I know they may sorta sound the same and perhaps I should worded it differently but what I said means a failure in the ability of the market to function properly...implying a constraint or perversion outside normal markets. "Market failure" has a more endogenous-ness to it.

Ah, shoulda read the next paragraph. You DO know the difference. Now you know I do too. Good. We're on the same page there.

If any of these exist, which is just about always!, THEN THE MARKET IS NOT EFFICIENT --i.e. its results can be improved upon. Whether or not that improvement is to be a further mechanism added to that market, or something else like government intervention, is to be decided anew in each case, -- and that solution may change over time.

Yes. I agree. Now we have to demonstrate that this applies to health care and that an intervention or additional market mechanism can be added in beneficial way that is better than not. And if so, which one and how.

Well, here we are. Back at square one.

On your last paragraph,

No. I don't see that as the real question. The real question for me is how the health care sector (and all the things you cite) will react long term to changes. How will it all function? What new incentives will be created? How will costs get under control? At what "cost" to people? Will it be in rationing? Will it be in lower levels of care? How will Big Pharma look in a new system? How will this effect them long term? How will we deal with lower output from Big Pharma over time? Subsidies? How will taxes assessed to deal with ballooning costs in the future? Will there be cuts elsewhere? where? What will this do to technological R&D? I could on but I think you what I mean. Those questions you ask are rather one dimensional to me. Like family tree that spread out as it grows, I wonder about problems from problems from problems from new realties brought about other problems and systemic, incentive and behavioral changes. But unlike Back to the Future Part 2, we can't go back and get the book from Biff if it all goes wrong.

[paine]

john v's misson of tar trapping

"Well, here we are. Back at square one"

he's mr " i'm not convinced not at all....
see we're back at square one "

what an ideal type he makes himself into
watch the orbits tighten like his very own ....

clinical baby clinical

[Lee A. Arnold]

John V, sorry, I misunderstood you. But I am still unclear on some of your assertions. So, (1) do you think that private medical insurance is not structured like a market? Or (2) do you think that it could be a well-functioning market, but it is hampered by rules and regulations? Or (3) do you think that if people borrowed, or paid directly, for the medical services as they do for a Mercedes, then prices would go down and everyone would get what they need? (4) Do you think that a new life-saving technology should be denied to a child because its parents are too poor to pay?

Also: in your understanding of economics, (5) do you think that a "normal market" does not have market failures? Or is it (6) that they do, but in medical economics they are not significant for inefficiencies and cost overruns? (You might have an argument with the insurance companies, on that one!)

[john v]

paine's mission:

To undermine
honest discussion
with substance-free
smearing
of those
he does
not
agree
with.

[ddt]

um, no John V, he's right. It's not honest discussion, it's idiotic, non-sensical muddying of the waters. Maybe you really are that stupid, but I'll give you the benefit of the doubt and assume that you are being obtuse on purpose.

[John V]

Nice, ddt. At least is Lee is engaging the matter. More than I can say for you and Paine.

Hopefully, this thread will be 2 comments shorter within a short while with deletion of your comment and mine answer.

[ddt]

ok, let me explain why it is non-sensical and why your argument is based on being obtuse.

1. you assume, like a true Pangloss, that the current state of America is 'the best of all possible worlds' - despite voluminous evidence to the contrary in strange, far off lands like Canada.

2. as an added twist, you exercise a rigorous cartesian doubt towards any possible amelioration of the status quo, which is utterly unwarranted, and incompatible with any sort of policy making.

Lee can play Candide to your Pangloss if he wants, but it's a waste of time. There's important work to be done. We must cultivate our garden.

[John V]

Lee,

No problem. These things happen.

Anyway, your 3 questions:

1) sorta kinda

because:

2) Yes....most likely

3) Not exactly

4) Not really

5) yes they can have failures. But this one is the real stickler since people can disagree on what constitutes a true failure depending on expectations from the market. Furthermore, the failure may or may not have a sound remedy.

Obtuse example:

Is the fact that not everyone can afford a brand new car a market failure? Some may think so...but I doubt many. I don't. But even if it were, would some intervention be a good idea? No. The market handles it through used cars and public transport. Again, just an obtuse example for easy viewing.

6) Yes, a completely free medical system may produce market failures. The sticky part isn't that observation, IMO. The question what constitutes a failure that needs action. And then at that point, assuming it does need action, how we best intervene to get a positive outcome that is truly better than the condition produced by the failure.

A little more detail on previous answers:

2) (plus 3 and 4 indirectly) Yes....most likely. But how much better? I don't know. You must understand that my way of approaching these issues doesn't lead to always having concrete answers and best solutions but it does things into perspective in a way makes me very mindful of how things can wrong within the complex catallaxy, and thus, what NOT to do. And completely removing any meaningful of role of prices is one such way. It's undeniable and ironclad: Completely sheltering people from prices in any market makes cost problems infinitely worse over time. Not only that but it's also logical that assymetric information is made worse since behavior is altered in a way that people know even less about what they are doing than before. Again, undeniable.

To me, any market with broken mechanisms on prices and information is doomed to massive side effects and long consequences. Things don't become better, cheaper and more efficient over time voluntarily. There's no incentive for that without proper flows of market information.

So what's the answer? Again, I don't know. But the thing is that most things that we take for granted through markets have methods and intricacies that we couldn't fully conceptualize without seeing the finished product (that "product" being how he market handles a good or service).

Nonetheless, lurking within what I've just said in the previous paragraphs are, in my mind, tidbits of information that seem to be drawing attention to certain aspects of the "medical service market" and away from others. From there, I feel that quasi-interventionist ideas can be put forth based on these observations while others can be eliminated.

One thing is for sure, it would never be easy. We are operating from clean slate. The reality in which we find ourselves here in the result of bad policy decisions that have jerked outcomes in some bad directions. I cannot conceive how things would look today minus some past actions...like employer provided insurance, HMOs, Medicare/Medicaid (as they exist) and many regulations put on insurance companies and service providers. I would great if we could go back in time and remove and observe the results and adjust accordingly but is just possible.

So, to me, we are left with trying to enable certain natural forces that would probably be much better in the long run...but at the same...trying to shield consumers from the current realities as things evolve. Not easy but doable.

The other option is something that seems to be almost a complete 180 from that in which the problems it will cause will need to be mitigated through political will and endless spending challenges and that is not a pleasant thought.

[John V]

ddt,

1. you assume, like a true Pangloss, that the current state of America is 'the best of all possible worlds'

Not in the least. No way. You are conditioned to see that but it simply isn't there. Go find me something that truly gives that assumption.

as an added twist, you exercise a rigorous cartesian doubt towards any possible amelioration of the status quo, which is utterly unwarranted, and incompatible with any sort of policy making.

No way. Not at all. I have no idea where you get that except through a selective reading and an uncharitable filling in of the blanks with your own imagination.

[Fred]

JohnV: I have no idea where you get that except through a selective reading and an uncharitable filling in of the blanks with your own imagination.

You said something similar about me. Remember? The guy you accused of being an AUTOCRAT because he wrote that he wasn't too concerned about spiraling health care costs.

Fact is, you are the one making things up and seeing what you want to see, and then projecting these tendencies onto everyone else.

[ddt]

1. you assume, like a true Pangloss, that the current state of America is 'the best of all possible worlds' - despite voluminous evidence to the contrary in strange, far off lands like Canada:

"One thing is for sure, it would never be easy. We are operating from clean slate. The reality in which we find ourselves here in the result of bad policy decisions that have jerked outcomes in some bad directions. I cannot conceive how things would look today minus some past actions...like employer provided insurance, HMOs, Medicare/Medicaid (as they exist) and many regulations put on insurance companies and service providers. I would great if we could go back in time and remove and observe the results and adjust accordingly but [it] is just [not] possible."

yes, a clean slate in a vacuum in deep space, with no possible reference points beyond this 'clean slate' of a healthcare system that we find ourselves operating from in John V's rhetorical make-believe-land. (your paragraph should read "the reality in which I, John V, now find myself") Maybe healthcare could have been handled differently, but who knows? It's not like there are examples available of other countries that did things differently.

2. as an added twist, you exercise a rigorous cartesian doubt towards any possible amelioration of the status quo, which is utterly unwarranted, and incompatible with any sort of policy making.

"No. I don't see that as the real question. The real question for me is how the health care sector (and all the things you cite) will react long term to changes. How will it all function? What new incentives will be created? How will costs get under control? At what "cost" to people? Will it be in rationing? Will it be in lower levels of care? How will Big Pharma look in a new system? How will this effect them long term? How will we deal with lower output from Big Pharma over time? Subsidies? How will taxes assessed to deal with ballooning costs in the future? Will there be cuts elsewhere? where? What will this do to technological R&D? I could on but I think you what I mean. Those questions you ask are rather one dimensional to me. Like family tree that spread out as it grows, I wonder about problems from problems from problems from new realties brought about other problems and systemic, incentive and behavioral changes. But unlike Back to the Future Part 2, we can't go back and get the book from Biff if it all goes wrong."

... aaand therefore we do nothing. oh, sorry I mean have honest discussions, forever, because we can never be sure (to the John V standard of sureness) that changing things won't make it worse, now can we.

But of course, as a libertarian, your real motive is impede meaningful discussion that would lead to action. You sir, are a concern troll.

[john v]

DDT,

That was misprint. It's supposed to NOT a clean slate. I was going to post a correction but I thought the context clear. Guess not

[ddt]

hmm I seem to have messed up an italics tag - but you know what - Mark probably shouldn't fix it because, who knows, it's a slippery slope from correcting italics tags to redoing the whole code, and he could end up crashing the whole site in the long run.

[john v]

DDT,

As for the rest, it's not a defense of the status quo. It's concerns over results of various reforms vs others but I think that's clear from everything else I've written.