On Bloomberg.com, Betsy McCaughey reports that tucked into the “stimulus” bill is a provision that will dramatically affect individual health care.
But the bill goes further. One new bureaucracy, the National Coordinator of Health Information Technology, will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective. The goal is to reduce costs and “guide” your doctor’s decisions (442, 446). These provisions in the stimulus bill are virtually identical to what Daschle prescribed in his 2008 book,“Critical: What We Can Do About the Health-Care Crisis.” According to Daschle, doctors have to give up autonomy and “learn to operate less like solo practitioners.”
Warren Buffet is not a supporter of a real free-market. He’s for a “mixed economy”, and thinks the government ought to be taxing him more, redistributing his money to the poor. He talks about an “ovarian lottery” being responsible for much of his own success (I guess he’s either read John Rawls, or simply picked it up second-hand). As a super-rich self-made man, he’s a prime example of the “sanction of the victim”, asking to be hurt. Neither is Buffet great on economics. Here too, he has bought in to a standard the Keynesian/Monetarist mixture.
So, when Buffet gives advice he’s not saying how we can get to a thriving free-market; rather, he’s really saying: “Here is how we can get to a more stable mixed economy that does not cross the line into stagnation or a downward spiral”. He did this yesterday, appearing on digital website CNBC for a 3-hour special. Since he is somewhat influential, I thought some readers may be interested in what he said. There’s much to dislike in what Buffet says, but I want to present his views in this post; a critique can wait.
I’m going to paraphrase. Also, be warned that I’m going to read between the lines, but I do so with my full sense of honestly. [For what is probably a good transcript: see Gurufocus, but I got my summary from watching the show.]
With all those caveats, here is Warren Buffet’s advice to Obama: Continue reading
One of the troubling issues that arise during a recession, especially when we have arbitrary central bank monetary policy makers casting about looking for solutions to new problems is that there is a strong tendency to see inflation bandied about as a possible tool of monetary policy. RationalTheorist has looked at possible indicators of coming price inflation.
There are a couple of key reasons that inflation is considered as a policy tool. First, whether government officials believe in the value of inflation as a monetary policy, there is an implicit temptation to use inflationary policy to deal with the problems of financing massive government spending programs, such as the recent TARP, Obama stimulus package, and the FED’s various credit facilities. Inflation rewards those who hold debt, since an inflating money supply in the face of fixed debt payments means that debt loads shrink. A key problem that the FED has today is how it is going to issue enough debt in the form of Treasury bills in order to fund the stimulus programs. In addition, because asset values are inflated, any effort by the government to buy so-called “toxic assets” at prices that are too high will be ameliorated as the values of those assets would artificially inflate.
Two more expensive failures this week from our government. I am of course speaking of the Obama stimulus package which the Senate passed on Tuesday and the Treasury Department’s proposed plan for its continued effort to shore up our financial system, also unveiled on Tuesday. If someone had asked me to predict the worst possible scenario for these two efforts I would have suggested that a huge stimulus package (which fundamentally does nothing to help) and “more of the same” from Treasury (which doesn’t address the fundamental problems in the banking sector) would have been my picks. That is exactly what we received.
The stimulus bill is predicated upon the flawed view that the economy is in some sort of deflationary spiral, i.e. that the problem is fundamentally one of consumer panic, and for which the antidote is a government burst of spending. By putting money back into the pockets of Americans it is thought we can restore their confidence as they see that burst of spending stop economic decline. This of course ignores the question of how such spending is financed, through the sale of Treasury notes, in effect pulling that money from the pockets of consumers before putting it back, and mortgaging future taxpayers to do it.
From The Rational Capitalist:
Proponents of the “stimulus” plan claim explicitly or implicitly that the government can take other people’s money, spend it, and thereby cause a “stimulating” effect on the economy.
First, I’m not sure what they mean by “stimulating”. Do they mean that prices will rise? But if prices rise, then we all get poorer by definition so it can’t mean that. Will prices go down so that we can all afford more? Not really since spending lots of money on consumer goods rarely results in lower prices.
Please contact your Senators and let him or her know what you think of the “Stimulus” package which is scheduled to come to the Senate floor this Wednesday, February 4th, 2009.
The $819 billion-dollar bill passed the House of Representatives last week with a vote of 244 to 188. Read what the Wall Street Journal has to say on a few of the specifics. Or a recent article on how Japan’s “stimulus” failed. Other interesting articles can be found here, here, here, and here.
Here is my letter:
Doug Kass of Seabreeze Partners was on CNBC (Tue, Feb 3 2009, 7am EST), praising the current president’s economic team. He said the previous team was bumbling, but this new one was clued in and brilliant. The CNBC reporter challenged him, pointing out that secretary Geitner was part of the previous team. [Aside: As was Bernanke.]
A few days ago, Harvard Law School professor Elizabeth Warren, who heads a Congressional oversight committee, told the Senate Banking Committee.”Treasury paid substantially more for the assets it purchased under the [TARP] than their … market value”. Her evaluation was based on a detailed report that concludes that the Treasury overpaid by about 66%, paying $254 billion for assets worth $176 billion. (from: CNN)
In the popular media this translates thus: the banks cheated the tax-payers out of money. I heard Ms. Warren on NPR, where she was asked if Paulson knew about this. Her reply was that she did not know which would be better: that he knew and did it anyway, or that he did not have a clue. (My paraphrase, E&OE). More material for the populist Wall Street vs. Main Street theme. Sadly, the more that theme permeates popular culture, the worse for the economy.
As an individual, let’s say you have no savings, owe more money on your house than it is worth, and have a 50% chance of losing your job in the next 12 months. Would it make more sense to:
a) cut your spending and save more money
b) take out another loan and spend more money
Most individuals realize that (a) is the best option. In other words, when times are difficult, shouldn’t there be a tendency for individuals to cut back and save rather than take on more debt and spend? Duhhhh, right? If that is true for an individual, shouldn’t it be true for your neighbors? If it’s true for your neighbors shouldn’t it be true for your town, city, and country? If that is true, why is the federal government attempting to take more money from taxpayers and investors in order to spend it? Shouldn’t the government be cutting its spending like everyone else? If the government decreased its own spending and took less money from taxpayers, wouldn’t that immediately allow taxpayers to save more money by definition? If the government decreased its borrowing, wouldn’t that free capital up to be invested in private companies that are productive? Additionally, if the government decreased its borrowing, wouldn’t that tend to lower interest rates overall? If this is true, isn’t Obama’s proposal literally the exact opposite of what he should be proposing?
One of the more troubling aspects of the structure of the TARP bailouts is the potential to have government officials and their political agendas influence the day-to-day operations of the corporations who received funds. Already we hear threats from politicians demanding that TARP funds be spent in certain ways. Now we see signs of actual influence in company operations. From yesterday’s Financial Times web article “Treasury pushes Citi to cancel jet order,”
The US financial sector’s new political masters began exerting their influence on Tuesday as Citigroup was forced to scrap the purchase of a $50m executive jet that was seen as a misuse of money at a time when the bank is reliant on public support.
Only a day earlier, Citi had insisted it would complete the acquisition of the aircraft. But it backed down after officials acting for Tim Geithner, the new Treasury secretary, expressed strong opposition to the move…
Mr Geithner and his colleagues know that any full-scale overhaul of the financial sector will almost certainly require more funds from Congress. So their immediate priority is to restore confidence in the recapitalisation process, which polls suggest is deeply unpopular. An essential element of this is convincing the public that the money is being used in ways that benefit the wider economy.