Pguppy

Earlier today, Senator Baucus explains, in response to a question from Senator Coburn, that no Senator has read or fully understands what's in the massive health care overhaul bill.

Responding to the concern that setting up a government-run public option insurance plan would inject politics into American health care, public option backers are saying, “Right.  And that’s a good thing.”

Today the Washington Post reports, “Economists in this [pro-public option] camp say a public option would not underprice insurers so as to drive them out of business; political pressures from medical providers would restrain Congress just as it is restrained today from limiting Medicare rates too much.”

The article add, “And the [public] option’s pricing powers would be limited by political pressures against driving too hard a bargain on providers.”

This is a novel argument, that bringing “political pressures” into a private market makes that market more efficient.  I’d sure like to know the names of the economists in the public option camp who say lobbying Congress is a form of healthy market competition.  Ample real-world experience shows the opposite.  Massive government intervention distorts markets, reduces the benefits of competition, and leads to waste, inefficiency and cronyism, not lower prices and better service.

We already have an example from the world of health care.  Every year Congress experiences a political firestorm as it tries to save Medicare from bankruptcy by cutting reimbursement rates to doctors.  The American Medical Association, not surprisingly, vigorously objects and lobbies hard to preserve or increase payments to doctors.  A deal is reached and the controversy is re-scheduled for the following year.  Whether this management technique is saving Medicare or sinking it faster is an open question, but I doubt most Americans want their own health plan run this way.

The current lack of competition in health care comes from politicians, not insurers.  Health insurance is perhaps the most highly regulated economic activity in the country, with price controls, limits on products, extensive reporting rules, a ban on interstate sales, high barriers to entry, unequal tax treatment, and a host of minutely detailed federal and state regulations.  Congress and state legislatures might first try removing the anti-competitive laws that they created, and force insurance companies to compete more against themselves, before Congress sets up an insurance company of its own.

ObamaCare supporters are right about one thing.  A public option would reduce the cost of private insurance premiums.  It would reduce them to zero, as private insurers go out of business trying to compete against a federal plan that can print it own money.

If paying out public money to encourage drivers to trade their servicable older car for a brand new one is such a great idea, perhaps Congress should mail checks to people willing to bulldoze their current home and build a new, energy-efficient one.  Maybe the Cash for Clunkers program will be followed by a multi-billion dollar Shekels for Shacks program.

In pushing yesterday for the sweeping health care plan working its way through Congress, President Obama argued for a government option, saying it “would make health care more affordable by increasing competition, providing more choices and keeping insurance companies honest.”  He sounds like Adam Smith making the well-proven case for freedom in the marketplace – market competition drives down prices and improves quality and choice for consumers. 

No, the President hasn’t suddenly experienced libertarian enlightenment.  The competition he has in mind is the federal government competing against its own citizens.

Government works well when it sets rules that apply equally to all companies, protect consumer rights and provide for public safety.  When government itself enters a market though, in this case as an insurance company, government officials end their role as impartial referees and become market players, with one important difference.  The “competition” President Obama envisions is a national insurance company that can print its own money.

The point is well illustrated by Germany, which allows citizens to buy private insurance or pick a subsidized public option.  Guess what?  Eighty-five percent of Germans take the public option.  Having eliminated most private choices, program managers began rationing care.  According to today’s Seattle Times, “[Germany] tries to control costs by limiting what’s available.”  The practice is standard in socialized systems.  Laboring under intense budget pressures, government managers seek to control costs by limiting people’s access to medical treatments.

If the President wants us to gain from real competition, he should let Americans buy health insurance in any state, just like auto insurance.  Making private insurance companies compete for our business in a national market, not starting a federal super-insurer, is the best way to get health care spending under control.

The governor is thinking about vetoing a bill that would limit access to credit by placing new regulations on payday lenders. Political activists attack the 2,600 people working in the state’s 571 payday lending stores by calling them “loan sharks,” and say that a short-term loan works out to 2,700% when calculated on a yearly basis. First, they are manipulating their example to make the percentage rate look abnormally high. The fee for a $100 payday loan is $15. The average loan term is 20 days, which is 274% when calculated on an annual basis.

Second, they forget that if you are late by one day in paying your property taxes, the state will charge you 1,825% Annual Percentage Rate (APR) on a $100 tax bill. Here are some other common examples.

Overdraft fee: 912%. For a bounced check of $100 a typical bank will charge an overdraft fee of $35. Although the account holder might pay the original check amount plus the overdraft fee within a few days, the APR for this “loan” is 912%.

Credit card late fee: 652%. For a past-due amount of $100 a credit card company may charge a $25 late fee. If the cardholder pays the amount owed plus the late fee within two weeks, the APR charged by the credit card company is 652%.

Electricity bill fee: 560%. If Seattle City Light charges $30 plus its reconnect fee of $16 for a $100 electricity bill that is 30 days overdue the APR is 560%.

Late rent fee: 365%. Landlords typically add a 5% fee if rent is paid more than five days late. On an overdue rent payment of $100 this works out to an APR of 365%.

The political activists are playing a game by treating three-week loans as if they lasted a year.  Try it yourself.  The mathematical formula is: Loan fee divided by loan amount divided by loan term (in days) times 365 times 100.

If you lend a friend a dollar and the next day he pays you back $1.05, you just charged him 1,825% interest on an annual basis.

The math works the other way too. The borrower of a $100,000, 30-year mortgage at 5% will pay back $193,255 over the life of the loan – or 93% more than the amount he borrowed. A payday borrower will only pay back 15% of the original loan. So who got the better deal? The answer is both. Lenders provide different credit products for different purposes, depending on what the borrower needs. A payday loan makes sense if the borrower needs money for 20 days to pay a property tax bill that carries a stiff late penalty.

Across Washington, payday lenders employ 2,600 people, have a yearly payroll of $60 million, provide health coverage to 3,500 people, create $1.4 billion in easy-access credit, pay $5 million a year in taxes to the state, and are tightly regulated by the Department of Financial Institutions.

People working in payday lending stores don’t fit most people’s idea of “loan sharks.”

With the economy the way it is this is not the time for the governor to: 1) make it harder for people to get access to credit; 2) add new burdens to a business that is actually employing people; 3) reduce tax revenues by stifling a legal, profitable business sector – hey, these days the state treasury needs every dollar it can get.

On Earth Day, we commonly hear dark predictions about the looming horrors of global warming (a typical example, “What is at stake [is] our ability to live on planet Earth,” Al Gore). 

Yet not so long ago the news media issued dire warnings about global cooling and a coming Ice Age.  Consider these headlines:

• “The Earth’s Cooling Climate,” Science News, November 15, 1969.

• “Colder Winters Held Dawn of New Ice Age,” Washington Post, January 11, 1970.

• “Science:  Another Ice Age?”  Time Magazine, June 24, 1974.

• “The Ice Age Cometh!”  Science News, March 1, 1975.

• “The Cooling World,” Newsweek, April 28, 1975.

• “Scientists Ask Why World Climate is Changing; Major Cooling May Be Ahead,” New York Times, May 21, 1975.

• “In the Grip of a New Ice Age?” International Wildlife July-August, 1975.

• “A Major Cooling Widely Considered to Be Inevitable,” New York Times, September 14, 1975.

• “Variations in the Earth’s Orbit, Pacemaker of the Ice Ages,” Science magazine, December 10, 1976.

Reporters told the public about global cooling in the same confident tone used in today’s coverage about global warming, creating the strong impression that no reasonable person could disagree.  Here are some examples:

“The evidence in support of these predictions [global cooling] has now begun to accumulate so massively that meteorologists are hard-pressed to keep up with it.” The Cooling World

“A study release last month by two NOAA scientists that the amount of sunshine reaching the ground in the continental U.S. diminished by 1.3% between 1964 and 1972.” The Cooling World

“Telltale signs are everywhere...the thickness of the pack ice...the southward migration of warmth-loving creatures like the armadillo...”  Another Ice Age?

“Since the 1940s the mean global temperature has dropped about 2.7 degrees.” Another Ice Age?

“The threat of a new ice age must now stand alongside nuclear war as a likely source of wholesale death and misery for mankind,” The Ice Age Cometh!

Critics will say there was no scientific consensus in the 1970s that the world was cooling, but that’s not how the media reported it to the public.  Similarly, today some scientists want to debate global warming and its possible causes, but the media presents global warming as a settled issue, not to be questioned.  Since the reporting today about world climate is the opposite of what it was 30 years ago, it’s ok to be skeptical about the worst predictions surrounding global warming.