Don’t say we didn’t warn you
Dr. Paul Hsieh says the economic collapse of 2008 contains a lesson…and a warning:
In the 1990s, politicians wanted to make home ownership as universal as possible. They used laws such as the Community Reinvestment Act to force banks to make unsustainable loans to millions of people. They also expanded quasi-government agencies such as Fannie Mae and Freddie Mac to guarantee these loans.
This scheme could last only a few years. In 2008, the housing bubble finally burst and economic reality caught up with the politicians. American taxpayers were stuck with the tab for these “toxic” mortgages. The result was the Wall Street Bailout of 2008 and the worst economic crisis since the Great Depression.
In 2008, politicians want to guarantee “universal health care” with new laws and new government programs. President-elect Barack Obama wants to require health insurers to sell policies whether or not those policies are economically sustainable (for instance by requiring them to issue policies regardless of pre-existing conditions). He has also proposed creating a massive new “National Health Insurance Exchange” to help ensure “universal coverage.”
But no politician can evade the laws of economic reality.
Instead of universal health care, we need free market reforms that reduce costs, reward individual responsiblity, and respect individual rights. Some examples include eliminating mandatory insurance benefits, repealing laws that forbid purchasing health insurance across state lines, and allowing individuals to use Health Savings Accounts for routine expenses and to purchase low cost, catastrophic-only insurance for major expenses. Such reforms could lower costs up to 50 percent, making health insurance available to millions who cannot currently afford it.
We can’t go back in time and avoid the Wall Street Bailout of 2008. But we can still make the right decision with respect to health care. We must reject calls for “universal health care” or else we’ll be faced with a massive “Health Care Bailout of 2018.”
Learning from the mistakes of the past seems to be astonishingly difficult for our political classes. The “lessons learned” from the recent financial meltdown are not that government regulation of and intrusion into business transactions like loaning money for mortgages can result in disaster. In fact, banks, corporations, and other institutions are finding themselves on the receiving end of taxpayer largess courtesy of many of the same politicians who supported the policies that got us into our current economic catastrophe. As a result, I doubt there are too many politicians out there who are worried that if their dubious health care financing palliatives fail then they will be called to account for their failure. Have politicians who supported the Great Society programs of the 1960s been called to testify before a congressional committee on their role in the the financial insolvency of Medicare? What about that popular pyramid scheme called Social Security? As one commentator put it:
A lot of people have been comparing the Ponzi scheme allegedly run by [indicted Wall Street investor Bernie] Madoff to the Ponzi scheme run by the U.S. government, also known as Social Security.
That’s entirely unfair.
From what I can gather, Madoff at least made an attempt to invest the money he got from early investors to give them the returns he promised. Those investments failed to bring in enough money and the scheme was doomed to fail sooner or later. But if Madoff had been a more brilliant investor, it might have worked.
The federal government, on the other hand, never tried to make the Social Security system work. The feds didn’t invest the money in the market. They took the money that we gave them and lent it to themselves, promising themselves interest. To be paid by themselves.
The trouble is that American politicians are not only not held accountable when their socio-economic engineering schemes derail, but often shamelessly (and, mores the pity, sincerely) stand beside the smoldering policy train wreck of their own creation and loudly proclaim that the required remedy is still more government control.
This entry was posted on December 30, 2008 at 8:13 am and is filed under Economics of Health Care, Health Care Policy with tags Community Reinvestment Act, Economics, Health Care, Health Care Policy, Madoff, Politicians, Social Security, Universal Health Care. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.