Category Archives: markets

Obamacare Replacement

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One aspect of the plan on offer in the House is this:

…whether it includes enough reform to arrest the current death spiral in the individual insurance market.

Notably, the bill includes a new 10-year $100 billion “stability fund” that allows states to start to repair their individual insurance markets. Before ObamaCare, it wasn’t inevitable that costs would increase by 25% on average this year, or that nearly a third of US counties would become single-insurer monopolies. With better policy choices, states can make coverage cheaper and more attractive for consumers and coax insurers back into the market, and the stability fund is a powerful tool.

Right idea, but it needs a tweak.  As with all Federal transfers to the States (even though nearly all of them do not have this), this transfer needs a sunset (ideally, but not as a deal breaker, on a declining balance to the sunset date) by which the transfer will cease to exist.  States need time to adjust their budgets as their addiction to Federal money is broken, but in the end the costs a State inflicts on itself must be the sole responsibility of that State.

Then there’s this:

The larger goal is to start to restore the traditional state regulatory authority over health insurance that ObamaCare supplanted for federal control. Local governments understand local needs best. With more flexibility, autonomy and accountability, the GOP hope is that reform Governors can pry open markets and help promote a larger and more dynamic business.

The larger goal still, and an even better one, should be to reduce regulation altogether to a great degree, and let the markets regulate health insurance products and costs.

In the end, too, local governments do understand local needs better than remote Federal, and State, governments.  But the greatest understanding is even more local: the patient and his doctor.  These are the participants in a free market for health insurance products—nation-wide and freely crossing State borders—whose “regulatory” activities should prevail.

A Thought on Free Trade

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…which I’ll assume for this post is structured between participant nations as fair trade, since it’s possible to have free and unfair trade, and it’s unfair trade that should be anathema.  Not all free trade is unfair; the parameters of any trade agreement, parameters that make the trade fair or unfair, are matters of mutual agreement (or perhaps not so mutual in the case of unfairness) among those participants.

Don Boudreaux triggered my thought with his piece in US News & World Report.

It’s true that trade destroys some particular jobs. … Being concentrated in a handful of industries, jobs lost to trade are easy to see. But the same trade that destroys jobs also creates jobs elsewhere in the American economy. These job gains, being spread across many industries, are difficult to see. But they are real.

In fact there is a net gain in jobs, albeit it’s a small net.  Being diffuse, that gain doesn’t get noticed any more than do the sets of jobs themselves.

Foreigners who sell to Americans get dollars in return. And like Americans who are paid in dollars, foreigners either spend or invest their dollars. When foreigners spend their dollars, American exports rise. More jobs are created in American industries that export.

And

American jobs are created also when foreigners invest their dollars. For example, when the Canadian company Tim Hortons opens new stores in the United States, not only are American workers employed to build or refurbish these stores, Americans are also employed to staff them. Or when Koreans use dollars to buy stock in Apple or Caterpillar, these companies become better able to expand operations.

About those last two quotes.  Those outcomes also apply from the trade partner’s perspective.  Simply swap in “partner” and “partner currency” and swap out “American” and “dollars” as applicable in those two paragraphs to see the application.

Both (all—there’s no need to suppose only bilateral arrangements) sides to international trade agreements make absolute gains, just as in a domestic free market economy, all citizens participating in a freely agreed exchange make absolute gains.  Even though among those individual participants, one man has a net outflow of his money, and the other man has a net outflow of his goods he’s presenting in trade, both men have gained from their trade.

This is where the demand of some who are pleased to call themselves economists in the Trump administration go so badly wrong.  Their demand for balance in absolute terms—no import/export imbalance, no greater outflow of money than inflow—is impossible to achieve in a truly free and fair international trade environment.  Balance requires trade to be a zero-sum gain.  Free trade isn’t, though; all participants gain from free, fair trade.  Balance not only cannot be achieved, it’s undesirable.

Internet of Things

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…and default passwords.  Default passwords are foolish in any device, but here’s a particularly failing example.  A laundromat in Colorado had a security camera connected to the Internet (as is typical of security cameras), and it began hosting a particularly malicious bit of malware.

Bill Knapp, owner of Security Solutions LLC, whose firm installed the laundromat’s surveillance system, which included the security camera:

One of the hardest parts of this business is that everyone loses their passwords[.]

And when the camera manufacturer was called upon to reset the password, it could only reset it to the default password, which is well-known, as that’s how the consumer gets in to set up his system—which should include resetting the default password to an individual, hard-to-break one.

Steve McGregory, a researcher at security firm Ixia, about poorly secured devices:

Within nine seconds of turning on these things, they get hit[.]

There’s a hint there.

Republican Gadflies

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Karl Rove talked about health care coverage prospects in a recent Wall Street Journal op-ed, and that triggered a thought in my pea brain.

Senator Tom Cotton (R, AR) has announced that the House plan on offer, a plan designed to be passable through reconciliation, with later phases of repeal and replace for completing the task, is dead on arrival, and the House shoe start over and produce a more comprehensive plan in this first phase.  But Cotton has chosen to not offer a plan of his own, or outline what a plan acceptable to him would look like other than to address taxes and to more fully repeal right damn now Obamacare, or even to offer the tactics he’d use to get the new plan—which could not be done through reconciliation—past a Progressive-Democrat filibuster.

Congressman Jim Jordan (R, OH) similarly demands a broader bill right damn now, but he, too, has chosen to offer no tactics for getting his bill past a Senate Progressive-Democrat filibuster.  He’s just using the copout excuse that that’s the Senate’s problem.  Oh, and Jordan also declines to identify the value of a bill that can’t be passed.

Senator Rand Paul (R, KY) at least has offered an actual plan, but he, too, has declined to identify how he expects to get his plan past a Progressive-Democrat filibuster.

These gadflies keep demanding that everyone else put up (these three’s demands) or shut up.  It’s time these three put up; otherwise, they’re just porch dogs, yapping from the safety of their stoops.

Tax Credits in the Obamacare Replacement Proposal

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In the main, I’m opposed to these on a couple of grounds.  One is that it’s just more welfare; we need to find a way to move folks off welfare and into the labor force and jobs rather than keeping them trapped in the welfare cage—like we did when we originally reformed the food stamps program by requiring recipients to get a job or lose the stamps.  That reform not only reduced overall unemployment, it put recipients back into jobs (and off that welfare program).  These weren’t make-work jobs, either; net prosperity for those recipient families increased.  (Then the Obama administration withdrew the work requirement, and we got record numbers of folks back on food stamps).

The (refundable) tax credits are just more of this sort of subsidy, just in the form of a tax credit rather than a direct payment, like most subsidies are.

The other is that the tax credits won’t encourage health coverage providers to lower their rates and deductible requirements.  Quite the opposite, the credits would prop up those costs by allowing the providers to put a commensurate fraction of their charges onto the taxpayer: the credits would be used by the providers to make up the difference between what the coverage purchaser pays and what the provider charges.

On the other hand, the tax credits would approach acceptability under a couple of conditions: if the credits decline year-on-year to a final value of zero over some number of years, say, two or three; or the credits are sunsetted and disappear after some number of years, say two or three.  Or a combination of the two.

With those conditions, and with the understanding that both individual and State budgets need time to adjust, a disappearing tax credit, by providing that adjustment time, could become acceptable.