Small Biz Health Care Daily: Another Reality Check on White House Reality Check

On the White House’s “Health Insurance Reform Reality Check,” Linda Douglass of the White House Office of Health Reform recently answered a question about more government involvement in health care possibly limiting consumer choices. Douglass declared that no such thing would happen. Not only would choices expand, but there would more choice and at lower costs.

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, said:

“I find it interesting to click over to the White House’s ‘Health Reform Reality Check’ site now and then due to the fact that it is completely devoid of substantive analysis and sound economics. It is merely a collection of videos of various administration members parroting the talking points about how great more government control over health care supposedly would be. Ms. Douglass asserts that this health care agenda, which is focused on more government spending, regulations and mandates, would expand choice and reduce cost. But how this miraculous feat would actually be accomplished – especially given the fact that Economics 101 and history tell us the exact opposite occurs with more government – remains a complete mystery.”

GDP Numbers Updated

The U.S. Bureau of Economic Analysis came out with its second estimate of second quarter GDP today.

The top line number was unchanged, with real GDP growth in the second quarter registering -1.0%.

However, it needs to be recognized that government investment and consumption played a big part in making the GDP number look better than it otherwise was. Federal government spending was up 11%, and state and local government by 3.6%.

So, real private sector GDP growth – that is, quality GDP growth – actually came in at a grim -2.27%.

The theory on more government spending in recession is that it will somehow spark the private sector. The reality? Government merely crowds out the private sector.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: McCain and Market Reforms

On August 26, CNN.com reported: “Sen. John McCain, R-Arizona, said Tuesday that President Obama's efforts to reform health care have sparked ‘a peaceful revolt in America.’ … Though McCain firmly rejected the idea of a government-run insurance option, saying it would eventually drive private insurers out of business and lead to a full government takeover of health care, he echoed his 2008 campaign platform and said it would be irresponsible to simply ‘do nothing’ — especially with the threat of Medicare and Social Security going broke. ‘So let's go back with constructive, free-market incentives to improve the quality of health care and the affordability and availability,’ he said.”

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, points out:

“Senator McCain is absolutely correct. Free-market incentives are the correct answers to the current woes in our health care system – not more government spending and control. For example, smart reforms would include medical malpractice reform; allowing cross-border purchasing of health insurance so consumers can shop across the nation for affordable health coverage; allowing small businesses to join Small Business Health Plans that offer another choice and could make coverage less costly; and eliminate inequities in current tax law that penalizes small business owners regarding their health care premiums.”

Competition Among the States for Business

USA Today has published a short piece on states competing to attract business. It notes how Nevada is pitted against California, New Hampshire vs. Massachusetts, Indiana taking on some of its neighbors, and New Jersey against New York.

This phenomenon can be a plus or a minus for business and the economy. If it focuses on politicians picking winners and losers, and doling out subsidies (taking resources from one business, for example, to hand it over to another), then it’s a negative. If it focuses on broadly lower taxes and reduced regulation that helps all businesses and entrepreneurs, then it’s a big positive.

Of course, it’s always handy to check out the SBE Council’s “Small Business Survival Index” to see where the states rank in terms of their public policy climates for entrepreneurship and small business.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: Rationing and the “Experts”

On August 25, a news story in the New York Times reported the following: “‘Rationing.’ It is what many people say they fear most from an overhaul of the health care system — the prospect of the federal government’s limiting the medical care they can receive. Even some people who now have private health insurance through their employers have expressed this concern in opinion polls and public forums. They say they worry that the enormous price tag for providing care to tens of millions of additional Americans will eventually force everyone else to make do with less. Is that a realistic fear? Policy experts say people are rightly concerned about the nation’s health care costs. But they also say there is nothing in the current proposals in Washington to suggest that the country is likely to embark on a system of medical rationing anytime soon.” The article went on to quote four “experts.”

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, stated:

“Well, if the New York Times declares in a commentary piece dressed up as news that health care rationing is not a concern, then I guess we should all feel at ease. Oh please! Why didn’t the reporter or editors go to any of the many experts who understand economics and history, and therefore understand that when government gets involved in health care, the only means it has to control costs in the end are price controls and rationing care? Ironically, some of the experts included point out that government cannot now control costs, nor would it be able to control costs under the health care reforms being pushed. With that being the case, what happens eventually? The track record elsewhere and simple economics make clear that government turns to schemes like price controls and rationing, which mean that people fail to get the health care they need.”

Taxpayer Cash for Economic Destruction

The government’s “Cash for Clunkers” program was bad economics on so many levels.

I wrote a column on the issue, and National Review has an editorial. Let’s focus on a particularly egregious aspect of a plan only politicians could think up – namely, that economic destruction could be good for the economy.

In my column, I noted:

Fourth, there is the incredible waste of government deciding to destroy vehicles that still operate. Only politicians and their appointees could truly believe that destroying productive assets is good for the economy. As historian Burt Folsom has pointed out, it’s similar to the federal government’s subsidizing farmers, and then in 1948, “the overproduction was so dramatic that the bureaucrats in the Department of Agriculture ordered surplus potatoes destroyed via public burnings.”

And National Review observed:

When we talk about government policies destroying wealth, we usually mean taxes that shift money from efficient to inefficient uses. Rarely do we mean the deliberate destruction of valuable assets. Yet, thanks to the Cash for Clunkers program, which ground to a halt yesterday, we now have a visual aid to help with this abstract concept. Mechanics tasked with destroying the so-called clunkers have been posting the videos on YouTube, often muttering in anger as they fill the engines of perfectly good Corvettes and Cadillacs with sodium silicate and then run them until they self-destruct. The goal of the Cash for Clunkers policy is, literally, the destruction of wealth.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

SBE Council: The Consistent Fighter Against Big Government Health Care

The Washington Times ran an article on August 24 about various groups representing small businesses that have either flirted with or endorsed big government health care measures that would only raise costs, reduce competition, and diminish choices for entrepreneurs, small businesses and their employees.

It’s worth keeping in mind that throughout its existence, the Small Business & Entrepreneurship Council has been a rock solid, consistent and strong voice for pro-market, pro-competition health care reforms that would make positive changes, including reducing costs, and build upon what works in our current health care system.

To support SBE Council’s consistent position in favor of pro-market health care reforms, and against costly, big-government health, you can become a member by going here.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: Massachusetts Bad Example for the Nation

An August 22 Boston Globe report noted: “Massachusetts has the most expensive family health insurance premiums in the country, according to a new analysis that highlights the state’s challenge in trying to rein in medical costs after passage of a landmark 2006 law that mandated coverage for nearly everyone. The report by the Commonwealth Fund, a nonprofit health care foundation, showed that the average family premium for plans offered by employers in Massachusetts was $13,788 in 2008, 40 percent higher than in 2003. Over the same period, premiums nationwide rose an average of 33 percent.”

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, points out:

“Massachusetts just keeps providing information showing that more government mandates, regulations and programs in health care do not work. We’ve seen that taxpayer costs have skyrocketed, and now data shows that Massachusetts’ health insurance costs are highest in the nation. Given this economic reality, why in the world are our national elected officials so keen on following the Massachusetts example, including an individual mandate to purchase or have health insurance, or a ‘pay or play’ mandate on business?”