If Obamacare is Overthrown

If the Supreme Court tosses out Obamacare, the United States may have a unique opportunity to think about a framework for a rational health care industry.

The framework should begin with the free market. The guiding principle should be that individuals pay for their own health care. Without that guiding principle, health care provision will always be too expensive, inadequate for many, and absurdly inefficient. Check out the health care programs in Europe. None of them are any good because they all have too much government involvement.

Let us all admit that the free market isn't perfect. No question about it. The free market provision of health care will inevitably end up with situations that none of us like. No denying that.

But all policy decisions are a question of choosing among alternatives. No solution is perfect and government solutions almost always tend to be the worst available. Should the government really be delivering the mail?

We now have a completely absurd healthcare system. Hospitals are required, through the blunt instrument of denial of federal dollars, to provide health care to anyone who walks through the door. This absurd arrangement is a recent phenomenon. It wasn't always this way. There once was a time (pre-1960) that one had to prove that you could financially foot the bill before a hospital had to serve you. That concept worked.

To deal with folks who couldn't pay their way into a hospital, the US was dotted across the country in every locale with charity hospitals who took care of folks who couldn't pay their bills. There is no reasonable size county in the US that did not have such a charity hospital. This system worked and worked well.

But, the adoption in the mid 1960s of medicare-medicaid, spelled doom to the concept that hospitals could deny services to people that could not pay. In effect, the government took over the private hospital industry, by threatening the denial of federal funds connected to medicare and medicaid.

Now, it is automatically assumed that anyone has free and unfettered access to a hospital at any time they want simply by finding their way into an emergency room, whether they can pay or not. Meanwhile, charity hospitals no longer exist. Who needs them when every hospital becomes a charity hospital?

So, now we have a health care system that no one pays for (out of their own pocket). Any product that no one thinks they are paying for will find that it's price will increase without limit. Eventually, unchecked, the present health care system of providing free care for everyone will mean that all of society's resources will be consumed by the health care activities.

So, what to do? A return to a free market health care system is the answer. Individuals should pay for their own health care and should be denied access to health care in private hospitals unless they can pay for that health care. If the government wishes to get into the act, then the government should build charity hospitals and administer a separate system for folks who can't afford to pay, which would be a very, very small part of the population.

The market for catastrophic (in the sense of costs) care can be handled by the insurance market. Here is one place where state regulation of insurance should be abandoned in favor of a streamlined federal regulation that focuses only on "truth in packaging." The government should not dictate what insurance plans should be offered but should merely make certain that individuals are told straight up what the insurance plans offer and make certain that insurance companies deliver on the plans they sell to the public. In the case of pre-existing conditions, the government could subsidize some catastrophic plans if the citizenry deems that to be a good idea. But, individuals with heavy health care costs should shoulder much of the cost. No one should skate through the system paying little or nothing.

Those who fall through the cracks should become the wards of government-sponsored charity hospitals. No doubt, health care will not be as good in such places, but health care in such places will likely be far better than what governments provide currently in Europe.

There is no good definition of health care. I would not include provision of contraception as part of my definition of necessary health care, but it is clear that the Obama Adminstration does include such things. Let individuals make their own definition. The government is not omniscient. Citizens don't agree on what constitutes adequate health care.

One thing for sure: Americans don't like Obamacare. Even today, two years after passage, 57% of Americans favor repeal of Obamacare. That's pretty amazing.

Americans have traditionally believed in private responsibility and charity towards all. A free market in health care and a free market in health insurance, supplemented with charity hospitals for the indigent, is what the US needs, not federally dictated programs that deny citizens the right to choose the health care products and programs they desire.

Greece's Future -- Red or Brown?

The mainstream political parties are losing their support in Greece, as one would expect, given the imposition of austerity. The communist party and neo-nazi parties are on the rise and threaten political chaos and civil unrest. Sound familiar? This was the Germany of 1922-23 as the German government faced a mountain of reparation payments from the aftermath of the Treaty of Versailles and an enforced austerity program. Now Germany is the enforcer and Greece may well become the new Germany.

This is the predictable outcome of the Merkel-Sarcozy-IMF bailout scheme. There is no way that this solution will hold. It will come apart and Greece will become a different country, unrecognizable from the rest of Europe. Portugal, Spain, and Italy will eventually be on that path as well, unless the Merkel-Sarcozy-IMF plans are abandoned.

Europe needs a reality test, not austerity. The sovereign debts in Europe are unsustainable and unpayable. This is a pretty harsh reality, but it is the reality. No amount of "political will" by Germany and France will ultimately matter.

Remember that the US situation is worse, once state and local debt is added to federal debt. Greece is our future as well unless the realization dawns that our debts are unsustainable and unpayable as well.

You can always tell when a country has lost it's fiscal sanity when it thinks that if only it could get more revenue out of it's richest citizens, it's fiscal problems would be solved. Taxing rich people is completely irrelevant to the fiscal situation of Greece and to the fiscal situation in the US.

What is driving the debt problems of the Western economies are the entitlement programs -- retirement and health care. There is no set of taxes that can support these systems -- not in the US and not in Europe. Absent private savings, there is simply no way to support our rapidly aging population and the health care needs of the future. The empty charade that "government programs can deal with this" is nonsense. The government is not providing any savings for the future and government policies have obliterated private savings.

So, watch the future play out in Greece. Coming to your neighborhood soon!

Europe -- The Unraveling Process

German bonds are beginning to sink. A national strike has been called in Portugal to shut down the economic life of the country to protest the government's austerity measures. Bond yields in Spain and Italy have resumed their upward march. There is a growing awareness that Greek reforms will never take place.

No surprises here, unless your name is Merkel, Sarcozy, Bernanke or Geithner.

The European debt explosion marches on to its inevitable conclusion. The forces that drive sovereign debt expansion in Europe, in Japan, in the US, are alive and well. Politicians can huff and puff all they want, but it won't matter. The unraveling process is well under way. Check out the trend in US bond yields. We're going the same route.

In case you didn't see it, Ben Bernanke and Tim Geithner weighed in yesterday on how things are going in Europe.

Bernanke (to a House Oversight Committee): "In the past few months, financial stresses in Europe have lessened, which has contributed to an improved tone of financial markets around the world, including in the United States."

Geither (to that same House Oversight Committee): "The European economies at the center of the crisis have made very significant progress."

You wonder what these guys are looking at to make these kinds of statements. The American public is not well served by misleading statements from it's chief economic politicos.

Big News -- Greece Back in the Headlines

Elections are coming up in Greece and guess what? Greeks don't care for the austerity plans and economic reforms foisted upon them by the terms of the recent bailout. Surprise, surprise!

Merkel, Sarcozy, the ECB and the IMF are a ship of fools. There is no way the Greek population, or any population, would agree to these terms. It won't happen. So, why are the politicians putting us through this ruse? The same reason that American politicians are going through the charade that higher taxes on the rich can fund the American welfare state.

This is all ridiculous. The Greeks will never abide by the agreements. All that has happened is that the debts of Greece have been assumed by Germany (and, to some extent the, US through the IMF backing). "Extend and pretend" continues to be the policy of the Eurozone, enthusiastically supported by the Obama-Geithner team. It won't work. Give it up.

These sovereigns debts are unpayable and the sooner that this truth is faced the better for all concerned. Time for workouts across the Eurozone (including Germany).

Diamond in the Rough

The "Jobs Bill," currently under consideration by the United States Senate is a terrible piece of legislation. Nothing surprising about that. The fact that it is bi-partisan only adds to its odor. However, buried within the bill is a provision that limits some of the worst provisions of the Sarbanes-Oxley legislation of 2002 that has all but destroyed the US IPO market. Sarbanes-Oxley is the legislation that was passed in the heat of reaction to Enron and World Com and is one of the worst pieces of finance legislation that ever found its way through Congress (although Dodd-Frank is certainly even worse).

Sarbanes-Oxley was a reaction to the fact that the US stock market, from 1981 until 2002, had increased 1200 percent. That, apparently, was an inadequate return, according to the political class...hence the adoption of Sarbanes-Oxley. Since Sarbanes, Oxley, the stock market has basically done nothing, which, I suppose, is more in keeping with what the political class deems to be a more investor-friendly climate. Both SOX and it's step-brother, Dodd-Frank, have placed the American financial system in the deep freeze and other financial centers around the world could not be happier. Seeing American voluntarily abdicate its pre-eminence in world finance plays right into the game plan of Europe, China and all of our competitors.

Thus, the effort to give the IPO market a breather from the Attila the Hun approach of the Congress to free markets.

But, watch out. Now the political class is objecting. Even the Council of Institutional Investors has even weighed in. You might think that such a weighty institution is non-political, but you can forget that. The CII is dominated by far left politicos whose main goal is to use a heavy sledge hammer on American corporations and they are succeeding. Now the CII wants even this glimmer of help to those seeking access to capital markets to go take their case to foreign capitals. America is no longer the place to bring your IPO, so says the CII and the left wing political class. So, this small effort to give breathing space to companies seeking to raise capital is under siege.

This was the only decent provision in the "Jobs Bill." The rest of the bill is embarrassing. Perhaps the diamond in the rough will survive. We shall see.

Read Danny Hakim's NYTimes Article

I am not normally a fan of plugging NYTimes stories, but this one has to be read. Danny Hakim has written a terrific article laying out the plight of cities and counties in the state of New York. He recounts one story after another of impending municipal bankruptcies. In every case, the cause is the same -- bloated public employee expenses -- mostly public employee retirement and health care.

Normally in recessions, the costs of running government agencies slows down since there isn't any reason for employment costs to rise. But, not so with pension and health benefits. They rise astronomically regardless of the economy.

This problem is not confined to cities and municipalities in New York. California faces the same situation for almost all of its large cities and counties. Many other states are in the same boat, especially where unions have major political clout -- Illinois, for example.

So, for those who think Europe has problems, just relax. European debt problems are coming to your neighborhood soon and for pretty much the same reason -- absurd expenditures on retirement and health care programs.

Spain Says: "No Way, Jose"

The new Spanish government has announced that it plans to flaunt Eurozone rules regarding it's fiscal deficit. The 4.4 % promised by the previous government in its deal last year with the European Commission has been tossed aside by the new Spanish Prime Minister Mariano Rajoy. So much for fiscal austerity. Spain now has the worst of both worlds -- expanding debt and no real spending curbs. The Spanish economy has the highest unemployment rate in Europe, pushing it's way toward 25 percent. Not surprisingly, the new Spanish government cannot survive politically if it fully implements the austerity program that it agreed to just twelve months ago.

This will be the continuing tale. European countries will not live up to the austerity agreements that they forge with the ECB and the European Commission. Merkel and Sarcozy are wasting a lot of people's time with this. It is not going to happen.

Meanwhile, interest rates on Spanish debt surged upward. The beat goes on. Sooner or later the Eurozone "solutions" will collapse in tatters and reality will set in. The sooner the better.