–John Mauldin discusses the Medicare dilemma, then doesn’t say how to solve it. Here’s the solution:

Mitchell’s laws: Reduced money growth never stimulates economic growth. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

In the previous post, I discussed the “needless Medicaid dilemma.” Today’s post is related: It discusses the needless Medicare dilemma.

John Mauldin publishes what he terms, “an investment and economic newsletter,” titled “Thoughts from the Frontline.” It comes to me via Email, though I seldom look at it, because in my humble opinion, Mr. Mauldin is a boasting, self-promoter, who knows little of economics.

I must be wrong; many people disagree with me, Mr. Mauldin seems to support his family by publishing what I consider to be nonsense – though no worse nonsense than is published by virtually all other media writers.

I did, however, read one of his articles, because of the title: “Who Can Afford Health Care?” Most of the article mentions wealthy people who accept Medicare and Social Security, though they could afford to pay their medical bills and for retirement. He doesn’t blame them. He says, he would do the same.

The thrust of the article had to do with one of his daughters who has growths on her thyroid, and the doctor recommended removal of the gland:

She is the one child I have with no insurance. I knew it and kept hoping she would get a job that included insurance. Now that looks like a bad economic choice.

I gently asked the doctor about costs. It was not as much as I feared, but definitely not cheap. As maybe in the mid-range of tens of thousands of dollars. His fee was the minor part. (I was actually surprised at how low as it was. I make more than that for an hour-long speech, and what skills and training do I have? Just saying.)

This is an example of what I see as his boasting with false modesty. A real turn-off. Anyway:

But then he quietly said that the costs would go up a lot if it was malignant, as just the drugs to kill a thyroid cancer would be $25-30,000.
I didn’t bother to call other hospitals to negotiate a better price, or find a less expensive doctor. I simply had them schedule it. This is my daughter. It is her life, not a new car. Time seems to be of the essence. And life has blessed me that I can afford it.

But that’s the point. How many people find themselves in that situation and their father can’t step in? Or there is no father? You then go to a free clinic or an emergency room and try to get someone to help you, even though it’s not an emergency. Or you put it off until it is an emergency, or it’s too late.

Right. That is the real issue, although right-wingers tend to downplay it. They seem to think poor people are lazy bums who deserve their poverty, and if they want insurance they should pay for it.

Then Mauldin talks about:

(Our) system that we expect to take care of all the needs that, in my youth, were considered as minor. And that is expected to take care of the homeless and the mentally unstable. Drug users. And a lot of people who do not take care of themselves with a simple, healthy diet and exercise, but expect full service when their bodies rebel, crowding out the service and driving up the costs for those who are in real need.

Medicare fraud? It costs us into the hundreds of billions. Doctors who test for everything because they are afraid of being sued if they miss something, running up costs sky-high? An unbelievable lack of technology in this day and age, because of government rules? Insurance and paperwork? Costs that are the highest in the world by a wide margin, yet no better outcomes?
It seems simple. We need to have more-universal coverage. But there is a limit as to what any nation can afford.

Just when he was within an eyelash of the truth – we absolutely do need universal health insurance coverage — he veers off into ignorance about economics. What is that “limit to what any nation can afford”? He never says. He never indicates how America is not just “any” nation, but a Monetarily Sovereign nation. Seemingly, he doesn’t know the difference between America and a monetarily non-sovereign nation like Greece.

Then it gets worse:

We have promised the Boomer generation more health care than we will be able to afford, without major reforms in what we spend our taxes on. And if we raise taxes enough to even come close to what we need, the shock to our economic body will mean recessions, higher unemployment, and fewer jobs which pay less.

He’s right about the effects of taxes. But, he implies that taxes pay for federal spending. They do not. If taxes fell to $0 or rose to $100 trillion, neither event would affect by even $1 the federal government’s ability to support universal health care insurance. That is the essence of Monetary Sovereignty. Unlike you and me, the U.S. federal government creates dollars by spending.

Raising taxes as much as will be needed to pay for the currently planned programs will take decades of adjustment, and could cause a depression in the meantime.
There are no easy choices. As we will see, raising taxes has consequences in the short and medium term. The transition to where 30%, then 40%, of the economy will be taxes will be wrenching. If we can believe the polls, dialing back health care will not be popular. Raising taxes is no less popular. We want more health care, and we want someone else to pay for it. But there is no one else. It is just “we the people.”
There will be costs for whatever choices we make, even if we decide to do nothing at this time.

Because of his false belief that taxes pay for federal spending, he seems left with no solutions – just as Congress and the President are. (Perhaps he should feel proud to be in such noted company.)

He is correct about one thing however: Raising taxes and cutting benefits both are terrible ideas. Unfortunately, he and our leaders, don’t understand the third approach, the sole solution: Federal support for universal healthcare — free Medicare for everyone.

Not only would that provide a health benefit for all Americans, but the added federal spending would stimulate the economy and reduce unemployment.

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports


5 thoughts on “–John Mauldin discusses the Medicare dilemma, then doesn’t say how to solve it. Here’s the solution:

  1. Absolutely correct,”A Monetary Sovereignty CAN print limitless amounts of currency, BUT IT BETTER NOT, unless it has in place a means to protect the quality and the quantity of that currency. Without these two conditions being controled by the MS, “moral hazard” and unintended consequences would FORCE an uncontrollable increase in the amounts needed to feed the monster.Mankind will figure out how to personally gain more and more
    until the mathematical progression becomes self imploded.
    To be a MS , no other party can be allowed to produce that nations currency.

    Please,read the instablog on Seeking Alpha, The Economic Solution 2012;Zero Income Tax !
    by justaluckyfool.


    1. justa,

      You’ve been predicting disaster for quite an while, and I wonder what data you have to support your beliefs. It’s one thing to run in circles crying, “the sky is falling,” but you better present a piece of sky to prove your case. So far, all I hear is shouting. No evidence.


  2. Rodger, so few people see things from your (and most MS’rs/MMT’rs) perspective. It seems like we can see the approaching asteroid and most can’t or won’t. In this respect I find liberaIs as impervious to facts as conservatives. It leaves me with a helpless feeling because I know they are going to drag me (and my children and grandchildren) down with them.

    And I agree, Mauldin is clueless. I stopped reading Big Picture because he posts there so much. At Economonitor I can get Ritholtz without Mauldin (although Ritholz hasn’t really connected the dots yet he has some good instincts).


  3. not to mention what people could do with the money they save on their overpriced premiums. it simply is immoral to have to have to spend that much for healthcare.


  4. This John Mauldin clown nauseates me. He pretends to “care,” and he uses this false “caring” to maintain the fiction – the public delusion — that personal finances are the same as government or national finances. Based on this, he claims that there is “no money” for social programs or single-payer health care. These liars do their job well, since 99 percent of Americans believe their garbage. The liars claim that the USA is “broke” (which is a physical impossibility) and hence we must slash social programs (even though there is endless money for war, bailouts, etc). For the USA the problem, as always, is not lack of money, but mal-distribution of money.


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