Monday, March 29, 2010

Why healthcare reform bill will eventually go down to defeat

The bill is full of fatal flaws, as I and many others have emphasized. Mandating the purchase of anything just because you're alive is unconstitutional. Prohibiting insurance companies from refusing policies to those with pre-existing conditions will bankrupt the industry, because the penalties for noncompliance with the purchase mandate will be much less than the cost of insurance. Regulating the price that insurance companies charge, in addition to their profit margins, is also unconstitutional. Perhaps most important of all, the collapse of the Soviet Union proved once and for all that governments are utterly incapable of restructuring and efficiently managing industries, much less economies; it's simply too complex a job for mere mortals. And then there's that old economic maxim that says you can't impose price controls and hand out subsidies in a market without eventually facing the need to ration the product or service in question.

The bill, which amounts to the biggest restructuring of the American economy in history—of any economy, for that matter—and which promises to deeply impact the lives of every single one of its 300 million residents, was passed against the will of the people. Not a single vote from the opposition; every major poll prior to its passage showed that a majority of people were against it. Even today, the majority of people believe it should be repealed. Never before has anything this big passed in such an undemocratic, partisan manner.

It will almost certainly be a budget buster, at a time when we are already staggering under the burden of $1.5 trillion dollar deficits for as far as the eye can see, and a rapidly rising debt/GDP ratio that will soon take us to the lofty heights previously occupied by such economic titans as Japan and Italy. Never before has a major government program not ended up costing significantly more than projected, and this is one of the biggest to come along.

Arnold Kling has some pithy observations that bear repeating. Excerpts follow:

The health care legislation represents a culmination of a sequence of unpopular major initiatives from Washington. First, there was Henry Paulson’s massive transfer of wealth from the people most hurt by the financial crisis to some of the people most responsible for it. Next, came the massive, ill-conceived stimulus bill, which was not timely, targeted, or temporary but instead a pure power grab by Washington. Health care legislation is merely the latest straw.

The American people are watching their country being transformed from an exceptional, vibrant free economy to a broken European welfare state, and many of us do not like the direction of change. We may not know exactly what is in the health care legislation (does anyone?), but we know its intent to assert government authority over health insurance. We know that it creates a large entitlement, paid for in large part by unspecified future cuts in Medicare.

Thanks to the projected Medicare cuts, the Congressional Budget Office scores the health care legislation as deficit-reducing relative to current law. However, current law is unsustainable. Medicare spending will have to be cut in the future in order to avoid national bankruptcy. By diverting projected Medicare cuts into a new entitlement, this legislation makes the impending budget crisis in Medicare loom sooner and deeper.

The public probably does not understand this budgetary legerdemain, but their instinct is to distrust Congress. In this case, the populist instinct is valid, and the elitist contempt for ordinary citizens is quite unjustified.

The Tax Foundation has put together a summary of how the healthcare bill is to be financed. Note the huge portion (44%) that is paid for by cutting Medicare spending. How many are gullible enough to think these cuts will actually occur? And won't they just make the Medicare deficit even worse than it already is? There is some really serious, runaway deficit spending lurking inside this bill, and it's way too big and ugly to keep hidden for long.

This whole thing is so outrageous that it simply cannot survive. There is plenty of time for the people to look inside this healthcare box of surprises and come away horrified. Spread the word.

UPDATE: Here is an excellent paper written by Barnett, Stewart, and Gaziano that makes a very strong case for why the individual mandate is unconstitutional.


septizoniom said...


Gary said...

I really hope you are right on this.

Washington DC hasn't represented the people in a long time; Obama is just really in-your-face about not caring what the country thinks

Obama is counting on American's complacency and unwillingness to take a stand.

I fear he may be right, but I would **LOVE** to be proven wrong

I plan to vote out ALL incumbents this fall.

Bret said...

I think you're dreaming.

Or is that "hoping for change"?

Scott Grannis said...

Are my observations deficient? Is the public so stupid? We'll know the answer in November.

Bret said...

Scott Grannis wrote: "Are my observations deficient?..."

Perhaps non-complete as opposed to deficient. For example, as the folks at Volokh Conspiracy often point out, there's an important difference between a law being unconstitutional and SCOTUS striking down said law. In other words, unconstitutional or not, Obamacare might well survive. I'm sure you can imagine that some set of supreme court justices would find it all just hunky-dory.

In the end, is it really any more outrageous than what FDR did and got away with?

Scott Grannis said...

Reaonable men, even Supreme Court justices, can disagree about what is and isn't constitutional. But I am a reasonable person, and I think a healthcare mandate goes way beyond the authority granted to our federal government by our constitution.

brodero said...

What do you think would be acceptable to 60% of the voting
populace? I think there is a great
amount of confusion here. The flaws
of the bill are obvious but I am not convinced that some major change is not going to happen... too
many people have contradictory views....basically wanting health care but not having to pay for it
or have someone else pay for it.Unfortunately Rasmussen Polls fails to
reveal this underlying contradiction. Somebody's Ox is going to get gored....

brodero said...

The discussions of the constitutionality need to study
American History...Read about the
success (or lack thereof)of the Nullification Act
in the 1830's...

brodero said...

P.S. If South Carolina wants to repeat the same thing and support itself...maybe we should let them
try since we send them more Federal
money than we get back...I am sure
New Jersey and Connecticut would be happy to get some of their money back....

W.E. Heasley said...

Two very, very fundamental economics propositions were completely overlooked in the Washington D.C. health-o-rama: (a) finding the least expensive and simplest solution that actually solves a problem, (b) the allocation of scarce resources to competing ends.

The fundamental political problem overlooked in the Washington D.C. health-o-rama was the U.S. Constitution.

ObamaCare is the most expensive and worlds most complicated scheme that does not solve the problem. The allocation of scarce resources to competing ends merely becomes price controls which leads to non-price rationing.

Those are two strikes and one more strike and you are out. Taking a swing at the U.S. Constitution is strike three.

The “living document” view by progressives of the U.S. Constitution is pure horse manure. The U.S. Constitution was written by free men who wanted to remain free. That the freedom of the individual was paramount. That the state was merely to serve the individual and not the individual serving the state.

However, the U.S. Constitution does not serve the “view” of progressives. It’s the old and tired “status quo” debating point (progressives are like a broken record and so predictable). What ever works in the past is the “status quo”. Then the status quo is vilified. Hence the status quo then needs fixed. Oh please give us all a break.

ObamaCare is merely the worlds worst economic proposition with the ultimate aim being to create authoritative command/control.

brodero said...

This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding. ”

It is the law now....change the law if you don't like it...

Gary said...

Listen to these cowardly lawyer types arguing legal minutia of Constitutional law!

A republic government is supposed to represent the people, not force itself on the people.

The people were not happy with the "old" health system, because it cost too much, and the inflation rate was obscene.

No one believed last month that ObamaCare would solve or even address that problem.

Based on surveys by liberal leaning news organizations this week, 65% of Americans still don't believe ObamaCare addresses their concerns. (see the USA Today / Gallup poll for example).

ObamaCare will be repealed, or else it will bankrupt the country. Only a stupid fool believes he can get something for nothing -- and that is the promise behind ObamaCare.

Anyone arguing the Constitutionality of this nonsense can't see the forest from the trees.

The big question is whether the baby boomer generation cares about their children or if they are so selfish that they stick their kids with unpayable debts for their "free" care?

brodero said...

That is the first time i have been
called a lawyer..that will be 350 dollars....but seriously my problem is I was a history major....

Gary said...

many lawyers majored in history -- which is a subject that should be canceled from the education curriculum.

Its not that history is irrelevant, or that one can't learn anything from studying it -- its just that after millions of history majors people don't learn anything from it.

How many thousands of times in human history has some slick salesman come in and promised something for nothing? And how much suffering has been caused by this repeated fraud?

Obama is promising something for nothing, and I fear our children will all be enslaved under trillions of debt trying to pay for this "free" care.

brodero said...

You are going to be frustrated
living in a democracy.....especially when the
Hispanic vote wields its power in

Bill said...

Well, I am a lawyer and very much opposed to Obamacare but I do think it will be an uphill battle to get a court to strike this down. The courts have given the federal government broad powers under the Commerce Clause to pass such laws that would otherwise seem to be too intrusive. That said, there is no precedent for actually requiring one to purchase something (unlike auto insurance where you don't have to drive if you don't want to purchase the insurance). The risk, however, is that parts of the law are struck down, such as the requirement to buy health insurance, leaving in the requirements that all insurance cover pre-existing conditions and have no caps, resulting in...the public option because priviate insurance companies go bankrupt. Not a very appealing outcome.

brodero said...

That will be 350 dollars.......
just kidding

Todd said...

FYI: You say in this post that never before has a major government program not cost more than project. I believe the Medicare prescription drug benefit, which uniquely relies on free market competition, is an exception. Or so I read.

Scott Grannis said...

Todd: a quick search shows that costs for this program are indeed lower than projected. But the program is only a few years old, enrollment has been lower than projected, and only about 10% or so of the population has enrolled to date. Plus, its coverage is limited to a finite number of drugs. So I'm not sure this qualifies as a "major" government program. But thanks for pointing this out.

Gary said...

Bill, as a lawyer could you explain why the "commerce clause" essentially allows the crooks -- I mean politicians -- to assume any power they want without any limit?

What about the last article of the Constitution "All powers not expressly called for herein are reserved to the states or to the people"???

I don't agree with Obama on much, but I can't exactly have any respect for a Supreme Court that overturns private property laws (see the eminent domain theft case in New Haven) and then this year when the Supreme Court legalized corporate bribery of Congress.

Yes, I know Justice Whomever will try to argue that this is "not the precise phrasing of the instant case before the court" or some equally childish nonsense. If he is smart enough to be on the Supreme Court, then he is smart enough to know that will be the end result.

That the Supreme Court has the same lack of leadership ability as the rest of government is why I hope that Scott is right about eventual repeal -- but I fear Obama is correct that cowards will not stand up for what is right.

ObamaCare will bankrupt the US government, assuming the "on budget" spending doesn't do it first.

Either way, the quality of care is about to plummet as doctors are already quitting rather than working at a loss.

Rationing health care is going to be just as effective as rationing gasoline was in the 1970s

Douglas said...

Well, I am not a lawyer or a doctor and I think I am the only one here who doesn't make use of "socialized" healthcare. I pay as I go, which I do rarely, while, I am guessing, everyone here has joined an insurance pool thereby spreading the risk around. So far in my life this has worked, though I am figuring I will have to capitulate and buy some form of insurance, because we are supposedly required to do so in Massachusetts and will be required to do so under the Federal program, it seems. Damn!

However, I don't understand why some keep saying this is all about something for nothing. It is possible my insurance will be partly subsidized because of my income level, but I am sure I'll have to pay in a share, which seems only fair. In the few times I have had health insurance I have always paid, why would this be different. If the fee is taken as a healthcare tax it is all the same.

Massachusetts has forbidden pre-existing conditions exclusions and it hasn't been the end of the insurance industry, I think that is a crock.

I don't know if the mandate is unconstitutional or not, it sucks, but I am sure that something in the Commerce clause will be found to support it. This is the worst part of the Bill from my point of view. Why should I be forced to give my money to an industry I abhor? Frankly, I'd rather give it to the government, it is likely to be more accountable. I am sorry to see such a mess made out of an important reform.

After all, elections do matter. Polls don't... at least that is what every politician says... one of the things Obama was elected to do was to do health insurance reform. I don't particularly like how it was done, and I think a very poor job was done to explain it, in the face of a storm of BS. I think that is why some polls show it to be unpopular... but then why do I sometimes hear that a majority still wants universal healthcare. I suspect that you can get almost any poll result you want, and Rasmussen is usually to the right of the mainstream. And anyway since when has anyone here believed that being popular made something correct. Certainly people who comment here often decry popular judgments they happen to disagree with. One thing is sure this bill will give people like us something to talk about for a long time.