Tag: health care

–Deficit fears do more damage than deficits

An alternative to popular faith

Those concerned about large federal deficits cite fears of inflation, high interest rates and obligations of our children and grandchildren as major factors. See:

https://rodgermmitchell.wordpress.com/2009/11/15/deficits-and-interest-rates-another-myth/, https://rodgermmitchell.wordpress.com/2009/10/30/deficits-the-possible-vs-the-certain/ and several other posts on this site. Ever since we went off the gold standard in 1971, deficits have not been related to inflation or high interest rates. And no one pays for deficits, which is what makes them deficits. We, the children and grandchildren of Reagan-era parents, never paid for the huge Reagan deficits. (By definition, deficits are paid for only when we run surpluses.)

While deficit fears are misplaced, the damage these fears do is significant. Read these recent headlines.

08/14/09: Deficit Plays Into Health Reform: Democrats say it will be hard to push an ambitious health reform bill through Congress unless it reduces projected federal spending on medical care and begins to bring the national debt under control.

11/14/09: High Costs Weigh on Troop Debate for Afghan War: The budget implications of President Obama’s decision about sending more troops to Afghanistan are adding pressure to limit the commitment, senior administration officials say.

11/14/09: China’s Role as U.S. Lender Alters Dynamics for Obama:
China’s position as the country’s largest foreign lender means that President Obama is likely to spend more time reassuring Beijing than pushing reforms.

11/14/09: Obama vows ‘serious’ bid to cut US deficit: Obama’s Republican critics, and some conservative Democrats, have called on the president to rein in spending on huge programs such as health care and climate change to avoid inflating the sky-high deficit.

Thus, deficit fears will impact medical care, the fight against terrorism, financial reforms and efforts to prevent climate change, improve the infrastructure, improve education, etc. More specifically, read what the Wall Street Journal editors said on 11/16/09 about a new Medicare Commission:

“So far, the commission has banned knee arthroscopy for osteoarthritis, discography for chronic back pain and implantable infusion pumps for pain not related to cancer. This year, it is targeting such frivolous luxuries as knee replacements, spinal cord stimulation, a specialized autism therapy and MRIs of the abdomen, pelvis or breasts for cancer. Currently, the commission is pushing through the most restrictive payment policy in the nation for drug-eluting cardiac stents – simply because bare metal stents are cheaper, even as they result in worse outcomes.”

The belief deficits are harmful is debatable, at best. What is not debatable is that deficit cutting absolutely, positively will injure our grandchildren and us. Peculiarly, those wanting to cut federal spending consider themselves “prudent,” while the nation suffers under the blows of their meat axe.

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

-How to eliminate federal debt and save the economy

An alternative to popular faith

Here is the solution to the federal debt problem — a solution that involves neither increased taxes nor reduced spending.

The federal debt is caused by deficit spending. Taxpayers do not pay for deficit spending, which by definition is spending above tax receipts. Yet taxpayers find the debt worrisome for two reasons: They incorrectly believe someday, they or their grandchildren will have to pay it, and they incorrectly believe large federal deficits cause inflation.

Those concerns affect efforts to improve our health care system, crumbling infrastructure, bad schools, excessive taxes, bankrupt states, Social Security funding, poverty, joblessness and homelessness, Internet service, NASA funding, military funding, disease research and repeated recessions. The solutions require deficit spending, which debt fear prevents.

Currently the government obtains money for deficit spending by borrowing. It borrows by creating T-securities (T-bills, notes and bonds), then selling them. These T-securities are created in unlimited quantities out of thin air. This method, though still used, actually became obsolete in 1971, when President Nixon took us off the last vestiges of the gold standard. Before then, T-securities were collateralized in part by gold, which limited their issuance. Today, they are collateralized solely by the “full faith and credit” of the federal government, a resource the government has in unlimited supply.

Just as the government now creates T-securities out of thin air, it as easily and prudently could create money directly – also out of thin air and also backed only by full faith and credit.

Ending the creation and sale of T-securities would end the creation of debt. No longer would we suffer over deficits, fears that nations might refuse to lend to us and fears our path is “unsustainable.” Rather than “deficit spending” the process would be called “money-creation,” and what now is called “debt,” would more properly be called “Net Money Created.”

By eliminating debt, we would eliminate taxpayers’ concerns they or their grandchildren would pay it. Further, because the federal government now controls not only the supply, but the demand for U.S. money (via interest rates), large federal deficits have not caused inflation. See chart, below:

Deficits vs. inflation
Since we went off the gold standard, there has been no relationship between deficits and inflation.

The elimination of T-securities would allow us to create the money to solve our many economic problems and to prevent the negative economic consequences of tax increases or spending decreases.

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

-Richard Koo–If you don’t believe me, believe him

An alternative to popular faith
Listen to Richard Koo’s tape at http://www.ritholtz.com/blog/2009/11/richard-koo-great-recessions-lessons-learned-from-japan/comment-page-1/#comment-233008. He says some of what I have been saying for the past 15 years. Federal deficit spending is absolutely, positively necessary for economic growth.

I hope our government leaders listen to him, though I doubt they will. They sure haven’t listened to me. The reason: The debt hawks have the nation worried, because they equate federal debt with personal debt. So you hear that your grandchildren will have to pay the debt, and large deficits cause inflation, and surpluses are more prudent than deficits — none of which are true.

So, we struggle with trying to provide universal health care, which the government can and should provide, while debt fear negatively impacts the physical and financial health of millions.

Deficit spending grows the economy and can provide health care, too — and it never needs to be paid back. Never. But Congress, the President and most of the economists simply don’t get it. They don’t even look at our economic history, which repeatedly shows long-term deficit spending is necessary for long-term economic growth.

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

-An idea for health care insurance

An alternative to popular faith
        A goal is to eliminate the preexisting-medical-conditions penalty from health insurance. But if people wait until they are sick, before buying health insurance, the premiums for everyone will go up markedly. Congress’s solution is to tax anyone who doesn’t buy health insurance, a silly and probably unconstitutional action. If people cannot afford health insurance, it’s hard to see how threatening them with a tax will improve their ability to buy it, and the Supreme Court probably would reject any tax having the sole purpose of advancing a federal law.
        Here’s a thought for discussion: Rather than taxing people who don’t buy health insurance, why not reward people who do? What if the federal government gave every 18 year-old, who buys health insurance, an award of say $5,000. Nineteen year olds would receive say, $4,900. Each year the number would go down by some amount until a person turned 65, in which case he would receive Medicare.
        Anyone who waited until he/she was sick, before buying health insurance, would forgo the years of federal payments, a strong incentive to buy insurance early.
        Health insurance companies would consider only age, when selling policies. Since policies for young people are less costly than those for older people, young people would wind up paying very little, or even making a profit on their policy premiums.
        Yes, this wouldn’t be revenue-neutral, but who else will pay to insure the estimated 40 million uninsured and those with pre-conditions?
        O.K. those are the broad brush strokes. Can you see any way to build on this? What are your thoughts?

Rodger Malcolm Mitchell
http:/www.rodgermitchell.com