Kucinich on Stossel

This week's Stossel (on Fox Business network) talked a lot about Cleveland, and what was wrong with the city. The city's population was something like 2 million around 1950, but has dwindled by more than half, and is now ranked by some publications as the worst city in America. Stossel's proposition was that it was higher taxes, excessive regulations, and inefficient government services that caused the decline.

Stossel brought on the former mayor of Indianapolis, another city located in the region but which has been doing well. In the 90's, that mayor had privatized many functions that the government used to do -- golf courses, waste disposal, etc. He said they started looking through the phone book, and if at least 3 private businesses offered the same service as the government, they privatized it.

But to get to the point of my post, I was interested to learn that nutcase House Democrat and former presidential candidate Dennis Kucinich was the former mayor of Cleveland. In fact, he was the mayor at a time when Cleveland defaulted on their debts back a couple decades ago because he refused to sell city property or reduce government spending.

At the end of Stossel's show there was a Q&A segment with the audience. One of the members asked Kucinich what he didn't like about privatization. Kucinich said that the problem with privatization is that private companies want to make profits and that to do so they will lower workers' wages and raise prices.

So while I always thought of private businesses as entities that are forced to earn business by offering the best service at the best price, I realized that a lot of people focus instead on their incentives to keep labor costs down and profits up as a bad thing.

The problems I see with this "Kucinich view" (which I fear is shared by way too many Americans):

1. Businesses that cannot compete (offer a desired good or service at a price people are willing to pay) go out of business. Government services that can't compete (offer as good of quality service at the same or lower cost than private business) don't go away. They stick around and continue to offer worse service at a higher cost.

2. Government wages that are higher than the private labor market rate are really benefiting those workers at the cost of taxpayers. How is that fair to the taxpayer?

3. Why should government's goal be to keep public sector wages higher? Shouldn't the goal be to offer public services at the lowest cost? Wouldn't this include keeping labor costs down? Of course the government will always be forced to pay wages competitive with the private sector in order to recruit and retain public sector employees, but what is the argument for paying wages higher than that?

4. Government takes from taxpayers via force (threat of fine or imprisonment) in order to provide services, so when it uses taxpayer money to fund services that a taxpayer doesn't want or use, it is really stealing from the taxpayer or forcibly directing what they spend their money on. That is why government services should be limited to core public services that are truly serving a very high percentage of taxpayers.

5. Profits are kept in check by competition. It is a very rare instance where a business has no competition (a monopoly). Businesses can only make a profit to the extent they can keep costs down better than their competition (operate more efficiently) or are willing to accept a lower profit margin.

6. Wage rates are also maintained by competition. Businesses cannot retain quality employees without paying as much as their competitors are paying.

7. For those that think that non-profits or government can provides services at a lower cost to the taxpayer because they aren't taking a profit, that assumes (most of the time incorrectly) that the waste and inefficiency in government or a non-profit entity is less than the profit margin of the more efficient for-profit business. But what if, for example, a business with a 8% profit margin runs a service 15% more efficiently than government?

I believe the fairest and most efficient economic system is the free market where wages and prices are dictated by market forces -- that is, in the labor market, what employers are willing to pay and employees are willing to work for, and in the markets for goods and services, what the buyer is willing to pay and the seller willing to sell for. Government should reasonably minimize the amount of interference via regulation, and only provide core public services like roads, police, and parks that for various reasons are better offered by government than by private businesses.

VIDEO: Ryan at Rules Committee Sums Up

If there should be an individual mandate, it should be to watch this presentation by Rep. Paul Ryan at the House Rules Committee today (obviously before word spread that Pelosi has dropped DemonPass).

My comment on health care at HotAir

Below is my comment at a HotAir post about Paul Ryan decimating Louise Slaughter in an argument about Medicare.

But first, the video of the takedown:



The fact is that SS and Medicare are going bankrupt. Medicare costs are growing beyond ability for government to pay.

Cuts will HAVE TO BE MADE at some point. The question is whether to start now so we can adjust gradually and lessen the pain, or whether we continue to bury our heads in the sand and end up with abrupt cuts when the bill comes due.

A second question is what is the most efficient way to keep services up and costs down. And in my opinion, that is through reverting back to utilizing the free market as much as is possible given the current state of things.

Honestly, the best two things I can think of that government could do IF they wanted to mandate something that would lower health care costs are steps that would get consumers more skin in the game:

1. Mandate that all insurance plans have minimum percentage-based co-pays.

For instance, instead of paying somewhere from $0-$30 to go see the doctor, you pay a minimum of 10%-30%. Say you had to pay 20%. Now instead of just going to a doctor and not caring what it costs (say $200) because you pay $20 no matter what, if you pay 20% you now look around for the best price because if you can find a doctor that you like that charges $140 instead of $200, you only pay $28 instead of $40. The competition which drives down costs plus the higher amount that you’re chipping in will reduce insurance rates to save you net cost overall.

In the same way, X-rays and MRI’s and all other medical tests should be paid for on a percentage basis. This gives the users of the services the motivation to shop around for the best price at a quality they are comfortable with.

The market competition will bring down prices, and it doesn’t need everyone in the system to be price conscious. Just as with any other good or service, everyone will benefit from the efforts of the folks who are price conscious.

2. Mandate that all medical care providers post prices or offer on the spot quotes.

Without price visibility, consumers are unable to make informed decisions that include price. Right now, most people go find the best quality care they can and don’t worry about price, because they think someone else (insurance) is paying. There is simply not enough incentive or understanding for people to think through it and say,

“Yeah, I’m going to put in the hours of effort it takes calling my providers and insurance to find out what the best cost is for this visit or procedure, because even though it costs me the same either way, I know that it will ultimately raise my insurance rates if I don’t shop around for the best price.”

Until the health care system gives the consumers of health care both the price visibility and incentive to shop around and/or consume less, costs will continue to increase at an unsustainable rate.

I read a figure somewhere last year, and I wish I could find it again, that back in the 60’s, individuals on average paid for 60% of health care expenses out of pocket. Now they only pay about 10% out of pocket, the rest is covered through insurance (and even the cost of that is hidden through the employer-based system). No wonder we consume 3 times as much health care in number of procedures per person that we did in 1980!

VIDEO: Hitler on ClimateGate

Warning: the subtitles include profanity at least 3 times.

Other than that, I found it hilarious. Hat tip to Neptunus Lex.

C4P on Bastiat's Broken Window Fallacy

Doug Brady and Conservatives4Palin.com has a nice post from last year that I ran across that includes a more contemporary paraphrase of Bastiat's Broken Window Fallacy, as well as a John Stossel video on it.

Henry Hazlitt, an economist who was influenced by Bastiat, explained the broken window fallacy in his book, Economics in One Lesson. Here’s the relevant excerpt:

A young hoodlum, say, heaves a brick through the window of a baker’s shop. The shopkeeper runs out furious, but the boy is gone. A crowd gathers, and begins to stare with quiet satisfaction at the gaping hole in the window and the shattered glass over the bread and pies. After a while the crowd feels the need for philosophic reflection. And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. It will make business for some glazier.

As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Two hundred and fifty dollars? That will be quite a sun. After all, if windows were never broken, what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $250 more to spend with other merchants, and these in turn will have $250 more to spend with still other merchants, and so ad infinitum.

The smashed window will go on providing money and employment in ever-widening circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.

Now let us take another look. The crowd is at least right in its first conclusion. This little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to learn of a death. But the shopkeeper will be out $250 that he was planning to spend for a new suit. Because he has had to replace the window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $250 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.

The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.*

VIDEO: Paul Ryan at Health Care Summit

Paul Ryan does an excellent job of summarizing the budget gimmickry and issues with the current health care bills. It amazes me that the conversation could just go on without addressing these numbers. Obama just said that he had some problems with Ryan's numbers and moved on to another Democrat to speak about something else.

I hate the format where each speaker gets to talk for a set period of time, and there's very little back and forth actually hashing out any issues. And the whole summit, Obama gets to constantly frame the discussion after every Republican speaks.

In this case, there should have been considerable discussion addressing the points that Paul Ryan made.

By the way, I wish the Republicans had tried a lot harder to pin down Reid and Obama by asking them both to commit to not passing a bill using reconciliation or signing a bill that was passed using reconciliation. It would have made headlines if while being pressed hard Obama and Reid refused to make that commitment during the bi-partisan summit. It would have exposed how much of a sham the summit was. I'm willing to bet that if the Democrats think they have the votes to pass the Senate bill in the House, and a 2nd bill in both houses that would pass the Senate via reconciliation, that they will jam in through in the next few weeks.

2 Graphs: Jobs and Housing prices

Powerline blog has a great post with two informative graphs.

1. A graph of job gains or losses per month. It shows the natural cycle already starting trending upwards before Obama's policies could have had any effect. It's always important to keep in mind the business cycle's trends when evaluating whether policies have helped or not.

2. A graph of the housing market, asjusted for inflation, since 1900. It makes it clear how government policies and lower lending standards and easy money policies and the market irrationality caused by opaque mortgage-backed securities and their derivatives had thrown housing prices completely out of whack. They are only now back down near, but still higher, than the historical average. Based on this graph, you could expect anything from a stabilization in prices in the near future to a further pendulum swing down another 20-30%.