Does the GOP Shares Blame for Obamacare?

Besides the occasional Republican either voting for socialized medicine or preventing a filibuster of it, the guilt of the association with the proposal that passed the Senate and the GOP is very deep. In fact the recent bill, without the public option (but will force people into public care) looks increasingly like the failed experiment of Massachusetts.

Michael Tanner, a Senior Fellow with the Cato Institute recently noted that the primary highlights of Obama's health care program as it leaves the Senate mirrors the Massachusetts program that has become a nightmare. In particular, the final bill will likely include an individual mandate, a weak employer-mandate, middle-class subsidies, and increased insurance regulation.

The sweeping legislation passed in Massachusetts in 2006 set the stage for a dramatic shift in the role of government when it comes to health care. Critics warned at the time that the program would become more bureaucratic, more expensive, and less user friendly. Tanner believes that, three years later, that is exactly the case today.

Tanner notes that the problems with the program are significant and numerous:

• In spite of practically bankrupting the state in order to get maximum participation among residents to get health insurance, 200,000 people remain uninsured.
• The state requires every resident to have health insurance, yet that mandate seems to play only a small role in the number who get covered (evidenced by those who still remain without coverage). The real force behind insurance enrollment is due to the state's generous subsidies for the middle class.
• If cost containment was an objective, Massachusetts has failed miserably because health care costs continue to rise much faster than the national average. In fact, since 2006, total state health care spending has increased by 28 percent. An increase in demand that comes with expanded numbers of those covered always leads to either higher costs or greater shortages (or both).
• Insurance premiums have actually risen by eight to 10 percent annually. This is nearly double the national average. The "lower rates" we hear about in the political debate today are driven by smoke and mirrors and promise to be very short term.
• New regulations and government controls are actually reducing consumer choice and adding to health care costs. The government found itself in a powerful position once Massachusetts passed this measure. With that power the government only continued to expand controls at the expense of consumers.
• Program costs have exploded in spite of significant tax increases. To counter this, the state is considering a freeze on insurance premiums, reductions in reimbursements to providers, and even the possibility of implementing a program that would essentially ration health care. This promises to chase insurance companies and doctors out of the state, which only leads to higher prices and more shortages. A vicious cycle for the people of Massachusetts.
• As a result, there has been a shortage of providers, combined with an increase in demand, leading to increasing waiting times to see a doctor. As physicians find it more profitable to practice elsewhere, this situation will only increase.
  

Anyone seriously considering the health care bill navigating through the Congress should do so with great caution in light of the lessons that we have learned from Massachusetts.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Trade Deficit Shrinks, but no Parades?

The balance of trade -- the amount of goods imported versus goods exported -- has been a tool used by those who are shallow in their economic knowledge and deep in their isolationism. We are told by many politicians that trade deficits (importing more than we export) is a "terrible" thing and an indicator of an economy in decline. As a result of decades of trade deficits, the US is a "debtor" nation, we are told.

So the headlines at CNNMoney this morning should be good news: "Trade Gap Narrows for 2nd Straight Year." This narrowing is because the amount of goods we are importing each year is declining. Yet, this "good news" accompanies headlines of the fastest and largest increase in unemployment in decades (500,000 just since the elections). There are few, if any, who would argue that this economy is anything but weak and has been in a downward spiral for about two years (about the same period for which the gap has decreased). This reality should not be a surprise to any student of history.

In 1928 Republican Herbert Hoover was running for President of the United States against Democrat Al Smith of New York. Hoover, the Secretary of Commerce under one of the most successful Presidents in US history, was running against a very popular governor. It was easy for Hoover to defend the record of the President he served, Calvin Coolidge, as virtually every indicator pointed to an administration of success.

During the 20s Republicans took a tax rate that was as high as 70 percent under their predecessor and lowered the top rate to a low of 5 percent. Coolidge opened economic trade with countries and unleashed a level of prosperity we had not seen in generations. The number of people who made six digits (a very high income in the 1920s, and still is today) quadrupled. Inflation was less than 2 percent and unemployment was at a comparable amount. They called it the "Roaring Twenties" for a reason. There was, however, one area of "weakness" following Coolidge and that was the trade deficit that exploded during his administration. This area feel under the Secretary of Commerce and Hoover was taunted by his opponent through out the race. Finally Hoover assured voters that if Smith or he were elected, there would be quotas and tariffs placed on trade. Hoover won and by the Fall of 1929, he was sticking to his guns and pursuing protectionism in the form of the Smoot-Hawley Tariff Act.

That law did exactly what it intended to do -- dramatically reduce the importation of goods. Within a few years, the US had its first trade surplus in decades and also one of the highest unemployment rates in history. The Stock Market crash that proceeded the Depression was fueled by this trade protectionism. Wall Street knew that, if we penalized imports, foreign countries would retaliate. That led to the Market crash because investors knew that the value of goods would decline as the trade markets would shrink.

The high unemployment rate was associated with the trade surplus for a very simple reason. We imported more goods than we exported because our buying power had declined dramatically. Through out our nation's history over the last century, our periods of highest prosperity were accompanied by eras of trade deficits. Meanwhile, trade surpluses accompanied economic decline. In our prosperity we were buying more.

Today, the trade deficit is shrinking because the economy is shrinking. Our national buying power is in decline. Trade deficits continue to indicate a sign of economic strength, rather than weakness.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.