Friday, November 1, 2013

ObamaCare - We've Seen This Movie Before (hint: remember the financial crisis?)

If you want to know how ObamaCare is going to play out, you need look no further than the financial crisis of 2008.  Without beating around the bush, here's why:


ObamaCare (officially the ACA or Affordable Care Act) is little more than an elaborate redistribution scheme.  As Americans are now realizing, the idea is to force everyone into a highly regulated government controlled insurance system which subsidizes slightly more Americans than it penalizes.  By doing so, the subsidized voters will ensure electoral majorities from now on for The Democrat Party, the party of federal redistribution.

This is exactly what led to the financial crisis of 2008.  There actually was an equivalent redistribution scheme which was loosely called "The Affordable Housing Initiative" (herein the AHI).  AHI was not a single act but rather a constellation of policies pursued by President Bill Clinton and his administration.  Thanks to the policies and regulations which made up the AHI we got Subprime Mortgages, Liar Loans, Alt A Loans, Near Zero Interest Rates, Zero Down Payments, Securitized Mortgages, runaway Fannie Mae and Freddie Mac risk, and all the other elements which caused the housing bubble and the subsequent collapse under a different president in 2008.

What makes these two redistribution schemes so unique is that they represent a new wrinkle in the strategy of the redistributors.  The old model, like the New Deal and Great Society, was for the government to redistribute directly.  Taxes were raised, paid directly to the government, and then redistributed.  The AHI and the ACA take a different indirect route.  Rather than go through the government, these redistribution schemes are largely off the books of the federal government.  Through mandates, regulation, and a vast bureaucracy, private entities and pseudo-private entities are simply coerced into doing the dirty work for the government.

With indirect redistribution, politicians are able to say, "hey, I didn't raise your taxes!"  Then when it all goes bad they can say, "hey, it wasn't me, it was those greedy banks and insurance companies!"  In the case of the AHI, Bill Clinton and Barack Obama, who was a senator in 2008, have completely escaped all blame for the financial collapse they were instrumental in causing.  On healthcare, Barack Obama may not be quite so lucky only because healthcare is not a leveraged transaction.  Absent leverage there is no lag time between stupid policies and disastrous outcomes.


One of the reasons the AHI led to such a profound US and near global meltdown was the degree of centralization in mortgages and finance.  The AHI centralized and gutted the requirements necessary to obtain a mortgage.  The federal government essentially controlled the rating agencies that gave the mortgage backed securities AAA ratings.  The entire mortgage industry was essentially controlled by Fannie Mae, Freddie Mac, the FHA, HUD, and Ginnie Mae, all government entities.  Federal tax policy encouraged mortgage debt and speculation in housing.  Federal Reserve policy kept interest rates artificially low fueling the housing bubble.  Globally, the Basel II bank regulations gave extra weighting to mortgages when computing bank reserve requirements.  In other words, we put all our eggs in centralized baskets.  (Today, nearly 100% of all mortgages written end-up being owned by the federal government.  We have learned nothing.)
Centralization is the mantra of the ACA as well.  The healthcare system of the entire nation is now under the control of the central planner bureaucrats and politicians.  States and individuals are no longer able to seek their own solutions.  Outside of the narrow confines of what constitutes an acceptable plan, there is no choice.  Reimbursement rates are now dictated by one bureaucratic entity.  The same goes for treatments, devices, drugs, testing, etc.  Medicine was always considered an art because the science can never be fully complete.  Now it is impossible to approach medicine as an art - it would be like mandating that all musicians play from one sheet of music!


When markets run into trouble they have adaptive mechanisms to self correct.  Market transactions are taking place countless times every second and that information is constantly being fed to and reacted on by actors in those markets.  Price, supply, demand, quality, etc are all being constantly adjusted in response to these market signals.    But that all breaks down in centralized bureaucratic systems.  It took years for the government to modify its disastrous food pyramid, long after it was common knowledge that the advice was dangerous.  The latest one is no better.  This is exactly what happened with the AHI and what will also happen with the ACA.  The pace of innovation in medicine has always been one of the bright spots in our history.  Expect that to end.  Future medicine in the US will now be as cutting-edge as the United States Post Office.

Confusing Symptoms and Diseases

You see, a bad website is but a minor symptom.  The disease is unresponsive centralized redistribution.  That disease and it's effects will be catastrophic eventually.    

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