–Et tu, Wall Street Journal?

An alternative to popular faith

The average person doesn’t understand the difference between federal government finances, state government finances and personal finances. The same could be said of most politicians and most editorial writers.

But one expects more of the Wall Street Journal, whose editors are, after all, immersed in finance all day long. So it was saddening to read WSJ’s March 1, 2010 editorial titled “Back to the ObamaCare Future.”

The editorial begins, “Natural experiments are rare in politics, but few are as instructive for ObamaCare that Massachusetts set in motion in 2006.” Do you detect the problem? The WSJ thinks a state-run, health-care program provides a learning template for a federally run program, despite the crucial differences in ability to fund programs. (States’ access to money is limited; the federal government’s access is unlimited.)

The WSJ properly criticizes Governor Deval Patrick for wanting to set hospital and doctor rates. Why does the governor want to do that? So he can cut the rates. You see, the Massachusetts program is running a deficit (of course), so rather than committing political suicide by raising taxes, the governor wants to assure worse health care by discouraging doctors and hospitals from operating profitably in his fair state.

The editorial continues, “The administered prices of Medicare and Medicaid already shift costs to private patients, while below-cost reimbursement creates balance-sheet havoc among providers.” Yes, that’s right. Medicare pays too little, which forces our most talented doctors into boutique programs, where annual fees run anywhere from $50 to $5,000 (or more?) Eventually all the best doctors will be unaffordable to the very people Medicare is supposed to help. And smaller hospitals will disappear. This because of federal price controls.

The editorial continues, “It doesn’t even count as irony that former Governor Mitt Romney (like President Obama) sold this plan as a way to control spending.” Sure, states need to control costs, but why doesn’t President Obama understand the difference between state spending and federal spending?

Let’s see if we can clarify the difference: Taxpayers pay for state spending. Taxpayers do not pay for federal spending. Can I make it any simpler?

Because states do not have the power to create unlimited amounts of money, they must rely on taxes and borrowing. Eventually, the ability to borrow runs out, and everything falls on the taxpayer. Ultimately, there is a direct relationship between state taxes and state spending.

The federal government does have the power to create unlimited amounts of money, and so does not need to rely on taxes. It does not even need to borrow (See: https://rodgermmitchell.wordpress.com/2009/09/10/it-isnt-taxpayers-money/)

The biggest problem with Medicare (and Social Security, for that matter) is that it’s limited by FICA collections. Medicare is a version of federal price controls, which WSJ properly criticizes. Government price controls always are damaging. As WSJ said, “. . . hospital rate setting in the 1970s and 1980s . . . didn’t control costs . . . and it killed people.”

If government medical rate setting doesn’t work, and in fact kills people, please tell me again how the universal health care plan is designed to save money.

And if the federal government has the unlimited ability to create money, without ever charging the taxpayer, please tell me again why the universal health care plan is designed to save money.

Oh, the unnecessary damage the debt hawks have caused — not just financial damage, but human damage — and all for refusing to acknowledge that federal deficits not only are beneficial, but necessary for a growing economy.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

3 thoughts on “–Et tu, Wall Street Journal?

  1. No sooner did I write the above post, than this appeared in the news:

    “(AP) Political gridlock in the Senate triggered a 21 percent cut in Medicare fees to doctors Monday, as the American Medical Association warned of a “meltdown” for seniors and the Obama administration scrambled to contain the damage.

    “Funding to temporarily stave off the cuts was part of a bill passed last week by the House. But the Senate failed to act on the one-month fix because Republican Sen. Jim Bunning of Kentucky objected that the $10 billion measure would add to the deficit.”

    Thank you, debt hawks.

    Rodger Malcolm Mitchell

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  2. I saw this post on ABC news and decided to look into this further. You may have seen my post, it places me deep into the deficit hawk category.

    It is true that federal deficits improve the health of economies, much like takeing a low-dose aspirin pill daily will increase your personal health. The deficit we are creating now days, however, is analagous to having large asprin entrees for lunch and dinner. See how long that lasts.

    Consider the greek tragedy: They’ve really been a powerhouse of the EU up to this point, haven’t they?

    Or 1920’s Germany: The debt that they were placed under was a Good Thing?

    The sad thing is, our deficit is issued largely in government bonds which are consumed largely by the Chinese govenrment. When they call to settle our accounts as the EU has done to Greece, do you think we will have any say in the matter?

    Clearly, there is a point in federal spending where the disadvantages outwiegh the benifits.

    You seem well educated and should already know this by now. If this is so, please stop spouting your soporific nonsense. It doesn’t give me any comfort in knowing that if and when the economy tanks, the money you are grubbing with these articles will be worth less even than your august body of work.

    Thanks,
    Steven Morrell

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  3. Thank you Steven,

    Your mention of 1920’s Germany (all debt hawks mention Germany) ignores the massive implications of the end of the gold standard in 1971. This is universal among debt hawks, and is a fundamental problem with their philosophy. The world of economics changed in 1971, but debt hawk beliefs have not changed to accommodate it.

    You might ask yourself how Germany, with its hyper-inflation, exacerbated by reparations demands, managed to pay for the greatest war machine in history.

    It makes no difference whether or not China calls “to settle our accounts.” The U.S. has the ability to settle any accounts, no matter how large. We don’t even need to borrow from China or from anyone else. Why? See: https://rodgermmitchell.wordpress.com/2009/09/07/how-to-eliminate-federal-debt-deficits-and-interest-payments/

    (At this point, you are about to use the word, “inflation.” True? For that discussion, you might refer to: https://rodgermmitchell.wordpress.com/2009/09/09/46/)

    When you say, “. . . there is a point in federal spending where the disadvantages outweigh the benefits,” what are the disadvantages and what is that point? Debt hawks generally use the “there is a point” argument, but are unable to be specific. Nor are they able to back up their claims with statistics.

    A premier debt hawk web site, maintained by the Concord Coalition, includes pages of statistics showing the large size of the debt and compares it to all sorts of measures, but not one paragraph of data demonstrating why a large debt is bad.

    But, if you look through the various posts on my site, listed in the left hand column, you will find specifics. You might begin with the very first post at the bottom of the column: https://rodgermmitchell.wordpress.com/2009/09/07/introduction/, then work your way up.

    Feel free to supply me with historical data that demonstrates how our large deficits are detrimental. You might wish to begin with the Reagan years.

    Thank you again for your thoughts.

    Rodger Malcolm Mitchell

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