Tag Archives: government

The American Welfare State

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James Pethokoukis, of AEIdeas, an affiliate of the American Enterprise Institute, has an article that shows the economic devastation extant in the policies of the Federal government.  It’s important to note that, much as I dislike the present administration, these results also flow from the “efforts” of a long string of administrations.

I don’t have much to add, so here is the complete article, reprinted with the kind permission of AEI.

6 charts that show the Welfare State run amok

The original purpose of Medicaid was to provide improved healthcare access for poor people, while not turning the safety net into a trap. Under President Obama’s Affordable Care Act, Medicaid will be greatly exapnded beyond what Congress originally intended.

In fact, as these charts show, it has already expanded beyond what Congress surely originally envisioned and, in the process, has created a terrible fiscal problem for the United States. (These charts and graphics come from a briefing today here at AEI, conducted by Gary Alexander, secretary of public welfare for Pennsylvania.)

A few scary factoids:

– In the 1960s, there were 18 workers per Medicaid recipient. Today that number is 2.5.

– The number of Americans on disability has risen 19% faster than jobs created during this recovery.

– There are just 1.2 private sector workers per 1 person on welfare or working for government.

– There are now just 1.65 employed persons in private sector per 1 person on welfare assistance.

Check out the charts and graphics for yourself:

1. Fewer workers and their tax payments have to support more and more Medicaid recipients.

2. The number of takers is now approaching the number of makers.

3. Medicaid and other welfare enrollment has exploded.

4. Medicaid enrollment is growing faster than economy.

5. Medicaid spending? You ain’t seen nothing yet.

6. Disability enrollees have exploded and are rising faster than job creation.

These charts show an out-of-control welfare state that is about to get even bigger, increasing both budget costs and dependency.

This Plant is your Plant, This Plant is my Plant

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With apologies to Woody Guthrie….

Here is Folksinger Obama with his latest…hit:

This plant is your plant, this plant is my plant
From California, to the New York Island
From the redwood forest, to the gulf stream waters
This plant was made for you by me

As I was walking a ribbon of highway
I saw above me an endless skyway
I saw below me a golden valley
This road was made for you by me

I’ve roamed and rambled and I’ve followed my footsteps
To the sparkling sands of her diamond deserts
And all around me my voice was sounding
This firm was made for you by me

The sun comes shining as I was strolling
The wheat fields waving and the dust clouds rolling
The fog was lifting a voice come chanting
This farm was made for you by me

As I was walkin’—I saw a sign there
And that sign said—no tresspassin’
But on the other side…it didn’t say nothin!
Now that side was made for me by me!

In the squares of the city—in the shadow of the steeple
Near the relief office—I see my people
And some are grumblin’ and some are wonderin’
Why this land’s made for you by me.

A Thought on Failure

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Or at least President Obama’s quasi-admission of his own.  This excerpt is from Sunday’s CBS News interview with Charlie Rose.  There’s also more, including Obama’s whining that he hasn’t been able to “change the atmosphere” in DC, with his partisan, character-assassinating politics.

Rose: But suppose, I mean he clearly would say, ‘Let’s look at your record; let’s look at the fact the unemployment is at 8.2%, and it’s unlikely to change.  Let’s look at how effective the stimulus was.  Let’s look at your management of the economy.  Yes, it was a bad hand you were dealt, but you have not made it to what it ought to be.  That is the centrality of their campaign.

Obama: Exactly.  That is his argument, and you don’t hear me complaining about him making that argument, because if I was in his shoes, I’d be making the same argument.

Hmm….

As an aside, it’s also interesting to see Rose’s mindset so plainly: government should be managing the economy.

DoJ and…Racism

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Speaking to the NAACP in Houston last Tuesday, Attorney General Eric Holder had this to say about Texas’ attempt to protect Americans’ voting rights by implementing a voter ID law that would help ensure that only eligible voters got to vote:

Many of those without IDs would have to travel great distances to get them—and some would struggle to pay for the documents they might need to obtain them.  We call those poll taxes.

The racism in Holder’s remarks is apparent.  As the WSJ pointed out

The Texas law stipulates that voters can use several kinds of ID to vote, including a driver’s license, passport, a US military ID, and (this being Texas) a handgun permit.  As for the “poll tax” canard, the law says the Texas Department of Public Safety will issue a free Election Identification Card if requested.

When was the last time Holder’s Jim Crow had a poll tax of $0.00?

But this is the new Jim Crow, Eric Holder style: anyone who votes Democratic (as opposed to democratic) should be allowed to vote, regardless of eligibility.  Never mind that the Supreme Court upheld a substantially identical voter ID law in Indiana just three years ago.  But Holder can’t attack Indiana; that state isn’t under his personal thumb, courtesy of the Voting Rights Act of 1965.  Texas is.

This is also the same Attorney General that, shortly after he assumed the position, threw out a case of New Black Panther voter intimidation of white voters that the Federal government already had won—at the end of the previous administration—and concerning which it was, literally, all over but the sentencing.  That case eventually led to the resignation of career Federal Prosecutor J Christian Adams.  This case also led to then-active Federal Prosecutor Christopher Coates’ testimony in front of the US Civil Rights Commission about the new DoJ’s policy of not seeking enforcement of voter laws when the victims weren’t people of color or when the suspected perpetrators were.

It would be interesting to hear Holder give the same speech to a more balanced audience.

Health Insurance vs Health Welfare

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The question of universal health coverage is one well worth discussing at the national level; the goal of universal coverage is to make health care services ubiquitously available, for rich and poor alike.  It’s a laudable goal.  However, in order to have a coherent discussion, it’s necessary to review the terms of the subject.

Too often, though, the discussion assumes that health care and health insurance are so much a part of each other that they cannot be had separately.  This is wrong.  Health care is what you get from your doctor or hospital.  You’re getting treatment for a medical condition, advice about how to treat a medical condition, advice about how to avoid getting a medical condition.  In return for these health care services, someone pays the doctor or hospital money.

Many people pay for these services with cash out of their own pocket, and many more would prefer to do so, were they given the choice.

Others—the vast majority of Americans (I’m eliding the free riders in the market)—pay for these services by buying something we call insurance: they pay a periodic premium to a health insurance provider for a policy that obligates the insurance provider to pay (most of) the costs of a medical condition should that condition actually arise at some time in the future.  The insurance company makes its money by selling lots of such policies on the bet that few enough people actually will incur the covered condition within a given time frame that the aggregated premiums over that time frame will more than cover the actually required medical payouts.  That’s what insurance is, including health insurance: it’s one person transferring part, or all, of a risk of something untoward happening to him to another—an insurance company, for instance—in return for an agreed upon fee.  For that fee, the entity accepting the risk, or the agreed part of it, agrees to cover the cost of that untoward event should it actually occur, with the aggregated fees over lots of such agreements, being enough to cover the required cost payouts.

Health care and health insurance, thus, are entirely separate industries: one is the actual provision of services, and the other is simply a means of paying for those services.

But for the risk transfer, or insurance, industry to work, though, two things must occur: the first is that the fees charged for the risk assumptions must be voluntarily agreed to between the two parties to the risk transfer.  If the fees are dictated to one or the other side, without any market flexibility, they run a very strong risk of being too high for the one party to afford, or too low for the other party to be able to cover the agreed costs.

The other thing that must occur is that the fees must be consistent with the risk assumed.  To take an over-simplified example, if a man has a risk of a medical condition that costs $1,000 to treat, and the likelihood of his incurring that condition within the next year is very high, and he wishes to transfer 80% of that risk to an insurance company (i.e., get the company to pay $800 should the condition arise), then the insurance company must be able to charge a premium that, over the course of a year, sums to $800 in order to break even.  Of course, if the insurance company were to sell that same policy to lots of folks subject to that medical condition, actuarially it’s highly unlikely that all of them—even with the same risk—will incur that condition in the same year.  This would allow the insurer to sell the policy for a lower premium than it could if the customer population were limited to that original single person.

With lots of companies in the market selling policies for a given coverage, competition ensures that a single company does not abuse single-company monopoly power and overcharge.  Nation-wide marketability of that policy both enhances the competition and expands the customer base with the insured-against condition, thus increasing downward pressure on the policy’s premium—the risk transfer fee.  This downward pressure makes insurance more accessible to more people.

The actual situation facing us, though, is a market structure of government limits on the policies offered, government limits on the premiums allowed to be charged, and two critical government mandates: every individual must buy health insurance—must buy those government-limited policies—and every insurer must accept all customers.  There is little to no market flexibility—or pressure—to structure coverages to match the risks being transferred, nor is there much flexibility to match the fees charged to the risks being transferred.  This combination of government limits and mandates is a health welfare program of universal coverage.

My own view is that universal coverage is unnecessary, never minding its laudability, and that health welfare (or welfare generally) is actively suboptimal when it’s the first resort, rather than the last resort after market forces have taken their effect on prices and availability.

Because the welfare program’s risks and fees do not match, and because competition among health insurance purveyors is limited, inefficiencies will rapidly develop in the form of coverage payouts being too great for the premium income in some areas and too little for the premium income in others, with a strong bias toward too little premium income.  While companies’ desires to charge more, including “too much,” would be heavily constrained by competitive pressure, the government’s bias is to hold down costs to its voters, without regard in the short term to the market consequences, and the bias is unchecked.

This drives the welfare program to one or more of three outcomes: the insurance companies must prevail on the regulatory authorities to raise premiums, they must get tax dollar help from the government to make up the shortfall, or they must stop providing that insurance coverage.  All of these represent stark cost increases to the insurees: either they pay higher premiums today (even for conditions for which they do not want coverage or whose risks are very low, because those conditions are included in the required coverage allowed to be sold), their taxes go up tomorrow, or next week they lose their insurance coverage altogether until they move to another company—if one is left in business.  Indeed, this is the rationale for the Individual Mandate requiring everyone to buy insurance: all those extra premiums, hopefully from young, healthy Americans who aren’t likely to need a payout (and who also aren’t likely to want to buy the coverage) are intended to provide those extra monies and so avoid any of the three outcomes.