Category Archives: markets

An Unintended Consequence

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The health coverage plan providers, companies like Humana, Aetna, Anthem, et al., are gaming the Medicare system to keep their Medicare bonuses coming in.  Surprise.

It seems that when Obamacare was passed, it included a system of paying bonuses from Medicare to those plan providers that got sufficiently high ratings on the quality of their plans.

But wait….

Medicare ranks privately managed plans…on a five-star quality scale and provides financial bonuses to providers of top-ranked plans. [A plan-holder’s] plan was set to be downgraded, which would have cost Humana its bonus. So the company merged plans covering [the plan-holder] and more than a million others into different contracts with higher scores. That preserved the bonuses.

That’s called cross-walking, and it’s entirely legal, if maybe a tad shady.

This is the sort of thing that happens, though, when Government intrudes itself too far into a marketplace.  Private enterprise is more agile than government bureaucracies can ever hope to be, and they can move much faster than any government bureaucracy can hope to do.

It’s also why black markets flourish in centrally planned economies.

The existence of this ability to cross-walk is a function of our Federal government’s intervention in what should be a free, competitive market.  The question wouldn’t even exist if we had an actual health insurance industry that operated free of Government fetters in an actual freely competitive market.

Biofuel Mandates

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The Wall Street Journal had a piece titled Biofuel Mandates Are a Bad Idea Whose Time May Be Up that centered on the possibility that these might get watered down, or even eliminated, sometime “soon.”

The Renewable Fuel Standard, which forces oil refiners to mix corn-based fuel into gasoline, is one of history’s great policy boondoggles.

Well, NSS.  The only things it’s done of practical consequence have been to serve as a backdoor subsidy for farmers and to drive up the cost of corn, corn substitutes, and food that eats corn.  And to drive up the cost of gasoline and to create ethanol fuel-related automobile engine maintenance costs.

But that’s the problem with Government mandates in general when they’re intended to create a market for a particular product.

As a mandate, the time for this one on biofuels never was.

The Russian Attitude Toward Rule of Law

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And the value of any contract with Russia.  These are demonstrated by Russian behavior regarding Russian natural gas flowing through Ukraine to western Europe.

Having won an arbitration dispute with Russian-controlled Gazprom over natural gas shipments to Ukraine, Gazprom and the Kremlin decided not to honor the ruling or the commitment:

Russia is tearing up its contracts to supply Ukraine with natural gas, sparking another stand-off between Moscow and Kiev and raising fears of new gas supply shortages across Europe during the winter.

In response,

European Commission Vice President Maros Sefcovic warned Friday that the situation raised “concerns not only for the direct supply of natural gas to Ukraine but possibly also for the transit of gas to the EU.”

Maybe he also should think about the wisdom of supporting the Russian pipeline across the Baltic Sea to Europe. Flows in that pipe will be just as fragile and vulnerable as the flows through the trans-Ukraine pipe. Russia is just setting up an additional weapon to use against the EU with it.

Tariffs and National Security

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In response to President Donald Trump’s of tariffs to be applied to imports of steel and aluminum at some unspecified in the (presumably relatively near) future and coming from as yet unnamed nations, Japanese Trade Minister Hiroshige Seko said

I believe there is absolutely no impact on America’s national security from imports of steel and aluminum from Japan, which is an allied nation.

I agree in principle with the generally negative attitude toward tariffs.

However, Seko has misunderstood the national security question. Stipulate that Japan (and the Republic of Korea, another staunch ally and key exporter of steel to us) is a strong and reliable ally.

  • Both rely on imports of raw materials in order to produce steel or aluminum
  • The supply lines from raw material sources to Japan and the RoK are long, vulnerable, and easily cut off by hostile action of the PRC and/or Russia
  • The supply lines from Japan and the RoK to us are long, vulnerable, and easily cut off by hostile action of the People’s Republic of China and/or Russia

Indeed, the RoK and our imports from them are even more vulnerable, with the PRC and Russia just a short hop away and the PRC’s client, northern Korea, just across a minefield.

Supply lines from other sources of our steel and aluminum imports—Canada, for instance—are much more secure.  While tariffs against nations like the PRC might be justifiable, I hope the tariffs will be suitably and tightly targeted and truly based on the illegality of dumping.

The national security question can be addressed through other means, by for instance mandating a certain amount of domestically produced steel and aluminum.  The difficult discrimination here is that the mandate must not be to “protect” American producers; they need to compete better.  The mandate must be for the demonstrable purpose of maintaining an American capability both to produce steel and aluminum and to ramp up that production capability when those supply lines get cut off.

What OPEC did to our oil supply, and so to our economy and national security, the PRC and Russia can just as easily do through our access to those metals.  And keep in mind the PRC already has attempted that with rare earth metals, which are critical to our digital capability.  One purpose of the PRC’s occupation of the South China Sea is to seize control of all those rare earth sources on the sea bottom.

Big Government and Responsibility

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The Progressive-Democratic Party-run States and the Republican-run States are demonstrating what they think of the intelligence and capability of ordinary American citizens.

The roughly half of states controlled by Republicans are therefore moving aggressively to roll back the law widely known as Obamacare, while the smaller number of Democratic states are working to bolster it.

One party does not believe that Americans in a free market, here for health care and for health care coverage plans, are capable of making sound decisions.  They need Big Government to think and act for them.  The other party believes the opposite: the ordinary man is fully capable of thinking for himself and doesn’t need Big Government to tell him what to do.

Oh, and that other party also believes in free markets and the associated competition that brings down overall prices and increases the range of options available.  That other party also believes that the greater range of options facilitates the decision-making of the ordinary man.  The one party believes the range of options only confuses the ordinary man and so—single payer for limited choices.