Thursday, November 14, 2013

The Obamacare meltdown continues, and that's good news

As I predicted last month and two months ago, Obama's signature domestic achievement is turning into a nightmare that will seriously and negatively impact the lives of tens of millions of people. Today Obama tried to limit the damage by effectively postponing the individual mandate for a year.

He didn't exactly postpone the individual mandate, however. As with the employer mandate, what the White House has done is to announce that it will not enforce the law that mandates individual compliance. Obama's style of governance is increasingly reliant on the non-enforcement of laws—even those of his own making—that, owing to the Law of Unintended Consequences, prove to be problematic and troublesome.

Obama probably figures that he has found a clever solution to the problem of millions of policies being cancelled. Now that he has announced that the individual mandate not be enforced, any insurance company that goes on to cancel an existing policy will be to blame for the cancellation. Insurance companies were eager to get in bed with the Democrats when ACA was being designed because they figured it would create millions of new healthcare policies. Now that same industry, once so eager to participate in crony capitalism, finds itself being thrown under the bus. Renewing millions of existing policies will subtract still more from the ranks of those buying policies on the Obamacare exchanges, and that in turn will result in heavy losses to an industry that banked on those people buying new, higher-priced policies.

This is not the way to fix the fatal flaws of Obamacare. It's also not the way to run a country, and it's not the way to transform one-sixth of the U.S. economy. We cannot continue down this path much longer, because the current system will not and cannot work to the satisfaction of everyone. The underlying problem with Obamacare is that it too reliant on government mandates, regulations, and subsidies; too much government, and not enough room for free market forces to figure out better and cheaper solutions. The way to proceed is not difficult to discern, as Ponnuru and Levin point out in their WSJ op-ed today: "A Conservative Alternative to Obamacare."

So even though the news is depressing, and even though sensible solutions seem to have little chance of taking root, I remain optimistic. That's because the path of least resistance at this point is shaping up to be very attractive: less government and more room for the private sector to tackle the healthcare problem.



Maybe, just maybe, politicians will at some point realize that we need to fix the broader economy in the same way that we can fix Obamacare. The private sector currently is heavily burdened with taxes and regulations that can be lifted. One of the biggest and best pieces of news these days is the ongoing collapse of the federal budget deficit, which has fallen from a high of 10.5% of GDP to now just 4% of GDP, and over the past 12 months has totaled only $652 billion, down from a high of almost $1.5 trillion four years ago. All this has happened thanks to an effective freeze in government spending accompanied by modest growth in the tax base (i.e., more jobs, higher incomes, more profits), and some modest hikes in tax rates.

Why don't we consider reducing the corporate income tax rate and limiting corporate tax subsidies and deductions? Why don't we do away with subsidies and deductions and lower marginal income tax rates for everyone? If legislation to this effect were to pass tomorrow, coupled with conservative, free-market reforms to Obamcare, I would immediately forecast 4-5% GDP growth over the next year or so. This happened once before, in mid-2003, with the Bush tax cuts, and it can happen again, especially now. The best solution to the current mess is a growth solution which transfers power from government bureaucrats to the private sector.

The bad news is that Obamacare is doomed; the good news is that it can be replaced by something far better.

16 comments:

W.E. Heasley said...

What about: After the ACA?

John Cochrane, University of Chicago, Booth School of Business.... for your perusal:

http://faculty.chicagobooth.edu/john.cochrane/research/papers/after_aca.pdf

vito said...

Sorry I have no empathy for my health insurance company they have been overcharging me for years and have been making tons of money .Its about time they have some sticker shock themselves.

McKibbinUSA said...

The fix for health insurance in America is for every American who cares about their health to acquire a major medical policy with a $10,000 deductible -- these policies cost almost nothing (around $150/month) and eliminate the insurance company from the equation for all care except catastrophic events -- I do not believe in low deductible policies, which are essentially a form of wealth transfer in America -- I also believe that healthcare insurance should not be a mandatory benefit for employers -- but, that's just my perspective -- I do not understand what Obamacare, Medicare, and Medicaid are seeking to accomplish in a 21st century economy.

McKibbinUSA said...

PS: A balanced budget amendment to the Constitution would be the best "medicine" for bloated government spending -- the Federal government needs to get back to providing only essential services to its citizens -- anyone working for government today who is not wearing a uniform is essentially non-essential -- that includes politicians who should be serving as volunteers under term-limited laws -- these things are going to happen whether we the people want them or not -- better to get on with it...

McKibbinUSA said...

PPS: I doubt the USA as we know her is going to survive -- watch for the USA to divide suddenly into three separate countries, which will include: a West Coast nation lead by Sacramento, CA; a Gulf Coast nation lead by Austin, TX; and a Northern Tier nation lead by the District of Columbia -- the old USA is already preparing to resist these changes -- watch and learn.

McKibbinUSA said...

PPPS: Adding to the above, the national debt will remain tattooed to Washington, DC, but the new Gulf coast and Western coast nations will start anew with zero national debt -- the motivations to assert separatism by the Gulf coast and Western coast are very real...

Bill said...

Scott,

You excel in backing up your comments with easy to read graphs.

Would you mind sharing the software you use in generating these graphs.

Scott Grannis said...

I use DeltaGraph on a MacBook Pro for my charts and graphs

steve said...

PPPPPSSSSS STOP IT!

Benjamin Cole said...
This comment has been removed by the author.
Benjamin Cole said...

The underlying problem with Obamacare is that it too reliant on government mandates, regulations, and subsidies; too much government, and not enough room for free market forces to figure out better and cheaper solutions.--Scott Grannis

Agreed!

And how does this sentiment apply to the VA, which is not only federally funded, but federally staffed, houses and administered, and for the taxpayer financed for benefit of former federal employees?

That is actually communism in action, let alone socialism...there is probably a bust of Lenin at VA HQ....

We are talking 300,000 employed by the VA and not one of them facing free market competition...imagine shedding all those employes off federal payrolls...

Curiously, when Paul Ryan unveiled his budget fix, two agencies completely exempted from cuts--the VA and Defense.

Just saying'....

William said...

Lipper Fund Flow Data

Monthly October

Equity Fund Inflows $53.6 Bil;

Taxable Bond Fund Outflows -$6.7 Bil

xETFs - Equity Fund Inflows $24 Bil;
Taxable Bond Fund Outflows -$5.7 Bil

Monthly September

Equity Fund Inflows $29.8 Bil;

Taxable Bond Fund Outflows -$5.3 Bil

xETFs - Equity Fund Inflows $7.9 Bil;
Taxable Bond Fund Outflows -$5.6 Bil


Monthly August

Equity Fund Inflows $1.8 Bil;

Taxable Bond Fund Outflows -$18 Bil

xETFs - Equity Fund Inflows $12.7 Bil;
Taxable Bond Fund Outflows -$10.9 Bil

sgt.red.blue.red said...

Ahhhh! The chickens are (finally) starting to come home to roost.

http://campusreform.org/?ID=5239

Self Inflicted Wounds

Notice the added comment: "I can't afford anything right now," one said. "I can't even afford my (student) loans."

Can you say "Schadenfreude"?

sgt.red.blue.red said...

Seriously, though, William McKibben has it correct in his first post. Through my own company, I have always purchased the high deductible health insurance policy.

Best way to fly, not only in health insurance, but for all risks. Protect against the catastrophe with purchased insurance, self-insure against the minor risks.

Frees up more dollars for investment.

Benjamin Cole said...

Dow heading towards 16k..who doesn't like QE?

BTW, how clueless is Obama?

He doesn't seem to realize that the Dow is up 70 percent on his watch....

You do not want to know what happened to the Dow under Bush jr.....

Hans said...

Blogger Benjamin said...
The underlying problem with Obamacare is that it too reliant on government mandates, regulations, and subsidies; too much government, and not enough room for free market forces to figure out better and cheaper solutions.--Scott Grannis

Been Jamin, I am afraid this quote by Mr Grannis, is much too mild for what CommieCare will do to this nation..

It would destroy the very fabric that this great Republic was built on..You can not replace 17% of the economy and replace it with an inefficient governmental unit..

Sgt Red, let the American Taliban suffer the consequences of their sheer ignorance..