More Unhealthy Economics

What will happen is that well off companies will subsidize poorly run companies such as GM, Ford, and Chrysler. Additionally, the elite will get immediate care (politicians, pro athletes), while the rest of us wait in line.

Don,

The report does not address your argument, but it provides some quantitative data which will allow discussions of your point to be grounded in data rather than conjecture. If you believe the Kaiser Family Foundation publishes only made-up nonsense and would trust nothing whatsoever from the Kaiser Family Foundation, then I will look for another source.

Without data, discussion can become unmoored. One could argue that the cost of administering health benefits for a private business is a million dollars per day per business, and that the cost for a centralized entity to administer the benefit would be twenty-five cents per decade but only if all businesses could be coerced into participating, and thereby justify the coercion; or make the opposite assumptions to justify outlawing centralization.

Sometimes data is unobtainable and there is no alternative to conjecture, but this does not appear to be the case for health insurance.

T.L. Holaday,

I welcome data, and I have no reason to distrust reports of such from the Kaiser Family Foundation. But the point of my letter involves no dispute over data. I did not dispute E.J. Dionne's assumption that health-care costs make up a large amount of many employers' costs of compensating their workers. The point, at this stage, is not empirical; my point is theoretical.

Now because I believe that, ultimately, almost any question in the social sciences is empirical, it would be legitimate to test the point I make using data. But nothing in the report you link to enable such a test; I grant — and have granted from the beginning — the validity of such data.

I was just short of 13 when I first understood government regulation and taxes. I can't remember who among my adult relatives helped me to that understanding.

Simply put, no business pays a tax. Businesses collect taxes and forwarded them to the government levying the tax, but they do not pay them.

A tax is a cost and a business simply factors that cost into the final price that will cover that cost. Nothing could be more simple to understand.

The business may or may not raise the final price in every case of increased cost, but I guarantee that it is a poor business that does not know how each cost affects its bottom line, the profit margin.

When that profit margin goes out of balance with what is desired and efficiency is at its peak the only answer is raise the final price to boost the profit margin.

Each government regulation decreed and each tax imposed affects the profit margin of a business. We the people are the ones who pay those costs in every instance. This is no theory, it is Street 101; and Street trumps theory every time in the real world.

Theory tries to explain what the street did or might do. A good theory may help prepare a novice to step into the street, but not every street fits the theory exactly and the novice still has to step into the street. He had better be flexible when he does, if he wants to maximize his success.

Anyone who thinks anything else is living in a fantasy world.

If a 12 year old can understand that, why do we have so many adults struggling with it?

"only if all businesses could be coerced into participating, and thereby justify the coercion;"

The fact you consider some convenient savings as possible justification for coercion shows two things about your outlook:
1) You consider money more important than freedom.
2) You think that tyranny is acceptable so long as that tyranny is more efficient at some desired end. Not all ends, but just those you consider important.

Forgive me for saying so, but that is a very repugnant outlook to me.

Vidyohs: The answer to your question I think is partly that most people have serious trouble seeing anything as a system, and further being able to consider chains of events. We seem to be pretty good at finding proximate cause, but also seem terribly myoptic when the first domino falls more than a few feet away from the one we noticed.
There is a really interesting chapter about this fact in "Origin of Wealth" if you have some time to pick it up. Really good stuff.

Don,

I didn't think it possible but you just suggested something above that is even more frightening than single payer government run health care.

Imagine the insanity of government picking up the cost of a business' retirees, a retirement package made privately by private people who are in essence in a constant escalating bidding war for good labor.

Holy crap!

Hammer,

Do you feel the state is justified in coercing drivers to limit their alcohol blood levels?

Do you feel the state is justified in coercing drivers to limit their alcohol blood levels?

Only when the state is responsible for the road on which drivers are driving. If the road is privately owned, then the owner of the road should assume such responsibility.

Why?

Because we assume to owner is also liable for safety.

We pay far more percentage of GDP on
health care then every other country that has a nationalized plan

Nationalized plans also engage in more rationing of health care than we do.
________________

In the end, it is impossible for the government to assume the actual costs of health care. The cost of all consumption is paid by those who produce.

The cost of all consumption is paid by those who produce.

THE COST OF ALL CONSUMPTION IS PAID BY THOSE WHO PRODUCE!

It cannot be any other way.

All the government can do is introduce more overhead, just as has occurred under the current 'system'.

The only way to achieve relief is to get the government out of the redistribution business and empower consumers by letting them individually control the what they have earned by their labors.

I have come to view nationalized healthcare as an unfortunate inevitability. In the battle between the wisdom of the few vs. the ignorance of the masses, the masses win.

That said, I get the sneaky suspicion that nationalized healthcare will end up costing less than private insurers, not for any good reason, but because our legislators will sneak some kind of tort reform into the bill, driving down insurance costs for physicians.

In the end, I believe two systems will emerge. The masses will get the care that the government will provide, while others will pay an additional premium for private insurance. Those that are insured through the private system will see their own doctor, receive better care, have access to the top advances in medicine, and the top physicians (because they'll be paid based on their market value) and those on the government program will get what the government can afford. Then they'll complain again… and we'll go through the process all over again.

Nothing the government does is simple, except for the extortion.

"We pay far more percentage of GDP on health care then every other country that has a nationalized plan.
Posted by: muirgeo | Oct 14, 2008 9:13:13 AM"

Which is why ours is so much superior to theirs, why they come to the USA for treatments, why their students clamor to come here for education in medicine, why so many of them stay and go into practice once they have their diploma, and while it can be done cheaper, socialiszation is the last and worst answer.

>>>This will never go away. People fight any nationalization plan are simply being counterproductive. They'd be far better off adding constructively to the discussion and pushing for a simplified plan that minimizes government intrusion and optimizes competition.<<<

I feel like the AFLAC duck in the barber shop as Yogi Berra is getting a haircut. Huh? Please, Doctor, pick a personality and stick with it. This schizophrenia of yours makes this dialog impossible.

"People (who)fight any nationalization plan are simply being counterproductive"

I'm sure all great totalitarian leaders said this right before he ordered his opponents execution.

Posted by: maximus

AAAwwweeee crap!!! All right you caught me. Indeed we ARE pushing National Health care mostly so we can commit genocide. But the plan was only to execute the republicans… we were gonna just enslave libertarians. Dang… it is really getting hard to be a totalitarian fascist socialist communist dictator these days with so many smart people like you maximus.

they don't change the fundamental point that if worker Jones will produce $26 per hour for Acme Inc. and would produce $25 per hour for Megacorp, then Acme Inc. must pay Jones at least $25 per hour to get Jones's services

Oh, man, you are such a moron. I mean, "reality challenged."

Do you feel the state is justified in coercing drivers to limit their alcohol blood levels?

In a free market, any insurance company this driver contracts with him would be wise to either jack up his premiums or drop him if he drives intoxicated. Without insurance his road options will be limited.

Oh, man, you are such a moron. I mean, "reality challenged."

Posted by: Noumenon | Oct 15, 2008 1:03:24 AM

The reality is, is that Jones could do this. Unfortunately, for every Jones there is, there's also a Noumenon who does not believe in his or her prospects to negotiate with the people who are providing the opportunity to earn an income and prefer to join forces with the collective to do the bargaining for him or her. These people generally regard these income opportunity providers as their adversary instead of a cooperative partnership of sorts.

It's either that or they're being overpaid in the first place and do not have the second opportunity (at MegaCorp) available to them. And really, maybe that is the reality for challenged people such as Noumenon…maybe s/he is on to something!

Gary,
"That said, I get the sneaky suspicion that nationalized healthcare will end up costing less than private insurers, not for any good reason, but because our legislators will sneak some kind of tort reform into the bill, driving down insurance costs for physicians."

You went right by yourself, my friend.

If there becomes a nationalized health care system then there is no longer any doctor liability to the consumer(patient), that shifts to the government; and, with a nationalized health care system the government becomes the insurance company so it will be impossible for a doctor's insurance to go up.

When muirduck talks about nationalized health care, just keep this in mind. he can practice and no longer have worries about product liability and he will be rewarded handsomely by the government as long as he attends the weekly party meetings.

Well, it would be passed on to the consumer, but the necessary increase in price would drive all of the chewing gum companies out of business, or at least into an unofficial "black market" for gum.

The Bubble Yum/Juicey Fruit turf wars of early 2034 will be particularly brutal, no doubt.

However, the tax can be said to hurt the producer only in so far as the tax hurts the consumers and prompts them to consume less. It becomes a lose/lose proposition, as the consumers either have to consume less of the good or trade off more to maintain consumption, and the business loses those who decide to consume less while gaining no benefit from the increased costs. Generally though, unless the tax is so large is severely cuts consumption, it is the consumers that really are punished.

My point is that the oft repeated general assertion that only the consumer ever pays for government burdens imposed upon producers, is false both theoretically and empirically. It is generally a shared burden, and not infrequently the lion's share is on the producer.

Consumers don't PAY for anything.

Everything is paid for by producers.

Many consumers are producers and they pay for what they consume with their productive activity. Consumers who produce no value, consume at the expense of producers.

This can be a voluntary exchange, as is my case where my wife produces veterinary services and I take care of home and children.

In other cases, the transfer is involuntary, with government welfare an example.

"Consumers don't PAY for anything.
Everything is paid for by producers."

I don't disagree, but you are shifting contexts here. The issue was not about trade, but about who pays the burden of a tax. I was responding to someone who incorrectly asserted that consumers pay the taxes imposed on producers.

I'm just talking about basic supply and demand analysis. Draw out your supply and demand curves, shift for taxes, and see how much of the tax producers (supply curve) are able to recoup through higher prices, and how much they must themselves bear because the higher post-tax equilibrium price has shifted back along the demand (consumer) curve.

And of course you are right that most people are both consumers and producers in SOME market, but in this context of supply & demand, we are talking about roles (rather than individuals) within a PARTICULAR taxed market.

Posted by: vikingvista | Oct 15, 2008 12:21:51 PM

Sir, could you please tell me what this has to do with my post to Gary? Or was it that post you were referring to?

You post was fancy, but seemed irrelevant to me. Help me out.

No sir vikingvista, I don't believe you proved it false at all.

From 1983 to 1989 I ran a flooring business in Utah. I collected tax along with my fees. The profit from my fees was my sole source of income vis a vis the business. All taxes I collected were forwarded to the government doing the levying. If I bought supplies, the payment for the product and all taxes included in the charge came out of the profit from my fees collected. Ergo, my business paid no tax, my customers paid all taxes.

No magic wand there my friend.

vikingvista,

Perhaps I am being hard headed, wouldn't be the first time. So I will give you another shot at making yourself clear.

If the absolute sole source of income to a business (and its owner(s)) is that which comes to it in compensation for its services, cuistomers in other words, then where does this money come from that you claim is used to pay taxes?

The customers, obviously in my still solid opinion, not only pay all the taxes, and operating expenses, a business collects and forwards, but they pay for the owner's food, clothing, shelter, security, and amusements as well.

Help me out, where does your tax money come from if not from the customers?

Have you ever looked at your phone bill? All the federal, state and local taxes and fees are itemized and tacked on at the end. My $40.00 monthly phone bill amounts to $48.00 by the time the govt is done with it.

As for health care being provided by the govt, I suspect it will be a lot like public schools. People who don't have access to good public schools (and that's a lot of us) essentially pay for school twice – once through taxes for a poorly run (and per student more expensive) public school, and again through tuition for the school of choice. My school district pays an average of 15K per year to educate a student. Meanwhile, the best private schools in town charge about same. Hmmm…

I have relatives in Italy who say that this is essentailly how the socialized health care system works there. Those who can afford it, or really want it, go private.

There are many ways to buy good, inexpensive health insurance in the US. If you are healthy and not linked to a high risk pool (smokers, overweight people), you can purchase low premium/ high deductible HSAs with excellent coverage. My family has had one for years and has saved tons of $.

Furthermore, no intelligent discussion of "free" healthcare (or any goods/service) can take place without addressing rationing. We pay so much for health care in the US becuse we USE a lot of of health care and becasue we CHOOSE to spend large sums of $ in the last weeks or months of our lives (whether this is "wasteful" is another issue – but it is one best decided by the patient or loved one). That is not an option in countries with socilaized medicine. SOMEONE has to make that difficult decision as to who gets what and how much treatment, and at what time in their life. And with nationalized health care, guess who will be making those decisions.

Viking, you and John are making the same mistake. The mistake is not taking into account what the consumers intended to buy with their money as a cost, or a penalty, if you'd prefer.

Take the bread example. Well, really bagels. I eat 1 bagel every morning for breakfast, and about once a week my wife makes burgers and we use bagels for the buns (tastes good, and the resulting inventory turn over avoids stale buns). So on average we go through 8 bagels a week. Assuming each bagel is 1$, that's 8$ per week.

The government, in their wisdom, decides the baker is going to get taxed 1$ per bagel sold. He isn't going to eat that fee, so my bagels become 1$ more expensive. My bagel habit now costs 16$ a week.

Now, my wife is pretty frugal. She would likely decide that bagels are too expensive to be using in such a fashion, and that we should switch to kaiser rolls at .25$ a pop. I am unwilling to put cream cheese on a kaiser roll for breakfast, so we decide just to use the rolls for the burgers, and I still get to eat 5 bagels a week for breakfast. If I want to eat bagels the same as before, I am going to have to cut back on paints, or books, or cat food or something.

Our total costs per week: 10$(bagels) + .75$ (Kaiser rolls) + X (The value of me being irritated that I need to eat kaiser rolls instead of bagels while enjoying a burger because some asshat beaurocrat decided to tax the baker.)

The baker, for his part, is short profit for 3 bagels. The government gets 5$.

Now note, the baker only loses money because I decided to switch products, not because of the tax. However, as pointed out, I am not equally satisfied, so it isn't an elesticisty, commodity thing. Maybe the baker goes out of business because he can't sell bagels at 2$ a pop. Now I am eating kaiser rolls every bloody time I was previously enjoying a bagel. The baker gets a new job, perhaps making kaiser rolls, but I am still out of bagels.

Anyway, bagel rant aside, do you see your mistake? You only look at the government -> business part of the chain, ignoring the consumer aspect. You are making the implicit assumption that the consumer can just as merrily find something else to spend his money on to fullfil the same desires, but that isn't true outside of a perfect commodity market, of which there are damned few. If I want hardwood floors, and they are taxed out of my price range because people are afraid of cutting trees, even if I pick an alternative flooring material/provider and keep the tax money, I am paying the price of not having the floor I wanted, but something I am not as satisfied with. In other words, I am paying more for something I wanted less.