Video: The difference between capital, transfer, and consumption spending
posted at 1:38 pm on August 17, 2009 by Ed Morrissey
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Dan Mitchell continues his invaluable series of videos explaining the policies of fiscal conservativism and the virtues of free-market economics from the Center for Freedom and Prosperity Foundation. In this installment, Mitchell explains a couple of key points on both free markets and the nature of government spending, which comes at the end. Before that, though, Mitchell makes the point again that the nature of the private sector lends itself to innovation and efficiency, while the nature of government doesn’t:
One might expect this to be obvious, but unfortunately many people seem to have forgotten why private-sector competition works. Businesses forced to compete against each other for business will innovate, creating new goods and services, while keeping prices low. Both impulses favor the consumer. If anyone needed a large-scale real-world example of this, the breakup of AT&T is a terrific example. It was unpopular at the time, as people relied on Ma Bell for good, solid, telephone service … that had remained basically unchanged for several decades. In the 26 years since AT&T lost its monopoly, the telecommunications sector has exploded, with ubiquitous cell phones, free long distance, local-service competition, bundling, and a panoply of choices that were unthinkable 30 years ago.
If we take competition out of the health-care market, we can expect something much worse than the old Ma Bell monopoly from ObamaCare. The problems we currently have in the market do not come from too much competition, but from government mandates and hindrances to competition.
The second point Mitchell makes is related but more broad than just the health-care issue. There are three broad categories of government spending: capital, transfer, and consumption. Only the first generates lasting benefits to society, with projects like sewage systems, schools, and so on. The others are redistributionist or outright corrupt. Guess which kind of spending has increased, and which has decreased?
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I wish Dan would run for office…
SnowSun on August 17, 2009 at 1:41 PM
The only ones that don’t want competition are those that can’t or don’t want to compete.
Get government out of the way and Americans will get us back to prosperity.
HoustonRight on August 17, 2009 at 1:42 PM
Capital spending only benefits society if it is needed.
Building a sewage system out in the middle of nowhere is capital spending, but since it is unneeded, it is a complete waste of money.
Capital spending by govt is also good only to the point where the private sector could not, or would not have created the same goods. If the govt is in competition with the private sector to provide capital goods, then it is a guarentee that the society loses, because govt always over provides, pays too much, and fails to maintain it’s capital goods.
MarkTheGreat on August 17, 2009 at 1:42 PM
There are very few capital goods that only govt can provide.
MarkTheGreat on August 17, 2009 at 1:42 PM
Ma Hell?
WashJeff on August 17, 2009 at 1:44 PM
I was hoping to see this type of post again…that was classic.
WashJeff on August 17, 2009 at 1:48 PM
Ma for whom the Bell tolls.
ICBM on August 17, 2009 at 1:48 PM
When did common sense disappear from the American culture?
coldwarrior on August 17, 2009 at 1:49 PM
ED! WHERE’S ZIEGLER????
Blake on August 17, 2009 at 1:49 PM
I give you example A: This video made no sense to me!
liberal343 on August 17.2009 at 1:39PM
ICBM on August 17, 2009 at 1:50 PM
Should be a must read for all of Congress. However, I don’t believe they would understand it.
hillbilly on August 17, 2009 at 1:52 PM
stalking palin
blatantblue on August 17, 2009 at 1:52 PM
liberal343 did not do write this this time, but did do it late last week on another thread.
WashJeff on August 17, 2009 at 1:53 PM
Decent vid, but the IRS is not an example of the costs of the IRC. The IRS merely enforces the law.
voxpopuli on August 17, 2009 at 1:55 PM
I might add the wons who don’t care about competition are the wons who just want gobernment to give them what they want by takin from me and you! This is a large and seemingly growing Democrat constituency thus the reason the Dems love amnesty! Seals their power for a long long time!
dhunter on August 17, 2009 at 1:56 PM
Republicans don’t quite understand economics. The reason private-sector competition works is that, when it doesn’t work, the businesses in question lose capital, and thus lose their ability to influence the economy in the future. Operations hemorrhaging money soon cease to operate, allowing scarce capital to be reallocated to more productive ends.
The private sector works, not by definition, but because it effectively culls its dead weight. It is sometimes the case that no business in an industry innovates or keeps prices low, and when that happens the industry as a whole shrinks due to the substitution effect caused by innovation and falling prices in other industries.
Republicans think the private sector can do no wrong, but this belief is incorrect. What is correct is, when the private sector does do wrong, it doesn’t do wrong forever.
hicsuget on August 17, 2009 at 1:57 PM
coldwarrior on August 17, 2009 at 1:49 PM
It seems to go in and out of fashion.
I’m looking for it come back in vogue soon.
elderberry on August 17, 2009 at 1:58 PM
Evil-mongering Racist!
NickelAndDime on August 17, 2009 at 1:58 PM
Unless bailed out by the government! Fannie, Freddie, G.M., Chrysler?
dhunter on August 17, 2009 at 1:59 PM
The part of this argument that simply isn’t logical is that competition with public option is bad. Why? Are you saying that keeping prices unnaturally inflated for the sake of private enterprise is morally right, even if the reality is that prices are higher?
That strikes me as fundamentally a position that a fiscal conservative cannot back with a straight face.
AnninCA on August 17, 2009 at 2:04 PM
I like the content of these videos but Dan Mitchell’s presentation seems like a weird and frightening combination of Mr. Rodgers and Joe Piscopo.
PackerBronco on August 17, 2009 at 2:04 PM
Government mandates also create a brain drain. Top thinkers and innovators who would normally be working to solve ‘real world’ problems are instead forced to go where the grant money and political pressure force them – into the command economy’s black holes, e.g., non-fossil fuel expansion.
whitetop on August 17, 2009 at 2:04 PM
The argument that government is unfair competition would suggest that we should close the US Postal services and give Fed Ex and others a competitive chance. *haha
(Sorry, this just doesn’t make any sense to me.)
AnninCA on August 17, 2009 at 2:07 PM
Because it isn’t true competition. If you want true competition then the public plan should be run as follows:
1. All of its income has to come from the premiums charged to people who adopt the public plan. It cannot rely on income from outside sources, ie taxes from the general fund.
2. It can’t run at a deficit. If it’s losing money it has two choices: raise its rates (charged only to the enrollees) or go out of business.
Since no public plan is going to follow those two rules that all private plans have to follow, you can’t really call it competition, can you? The only people who claim that this is competition are cynically trying to co-opt the language of the free market for an anti-market agenda.
PackerBronco on August 17, 2009 at 2:09 PM
When a business screws up, expands too fast, builds crap year after year, or doesn’t respond to the market at all, loses capital year after year…it folds its tent, sells off what it can and goes away.
When was the last time you saw an ad for a Hudson, a Packard, a Willys-Knight, a La Salle, or a Chandler?
Yes, the market can be cruel but it also tends to cleanse itself of inefficiencies.
The reason? Incentive. Simple incentive.
Build a mousetrap and maybe they will buy it. Build a better mousetrap and they most probably will buy it. Build a mousetrap that costs a day’s wages? No matter how wonderful it might be, they will not buy it.
No company or business should ever be allowed to use that “too big to fail” lie. And government (other than health and safety issues in production or product) should stay out of the way.
coldwarrior on August 17, 2009 at 2:11 PM
That’s why our economy is stalled right now…who wants to INVEST right now when they dont know if the turd in office will attempt to take over that industry next!!
Asajj Ventress on August 17, 2009 at 2:12 PM
I wouldn’t go that far, but why not allow Fed Ex et al to deliver 1st class mail? Why not remove the regulations that prevent companies to allow Fed Ex, etc. to handle all mail their mail traffic. *haha indeed.
PackerBronco on August 17, 2009 at 2:12 PM
Ann I thought you were a small business owner. Do you have any competitors in your line of business. What if I come set up shop in your area and I just need some tax write-offs so it doesn’t matter if I make money or not. Would you like to compete with me.
As for as the postal service. Yes, the private sector could manage it much better. You may not get to mail a letter for .44 but it would run more effeciently. That I guarantee.
HoustonRight on August 17, 2009 at 2:13 PM
A horrible, horrible example. Before AT&T, innovations of the company included radio astronomy, the transistor, the photovoltaic cell, the Unix operating system, and the C programming language. Anyone with a passing knowledge of engineering would know that the impacts of these are huge: Discovering the source of the universe, enabling every single electronic device, running every single computer, etc. Now we’re got — what — the camera phone? The iPhone (developed by Apple for AT&T)? This is your innovation? No, for innovation, the monopoly was actually better, since the company could take a decades-long view and didn’t have to worry whether a given invention would pay off in a year or two.
For price, competition is far better, though; my first romance was with someone who lived miles away, meaning a phone bill in dollars that was it would be now in cents (if that). But monopolies and the U.S. government made the technological world we live in now. Now, that’s no reason to revert to government control of health care — comparison to other governments’ health care will do just fine for those arguments — but comparing this to high tech (and especially using AT&T) only makes it look like a monopoly might not be bad for the country after all.
calbear on August 17, 2009 at 2:18 PM
The part of this argument that simply isn’t logical is that competition with public option is bad. Why?
AnninCA on August 17, 2009 at 2:04 PM
I think you are confused over the words public option. The words are designed to make you think that the private sector would provide those options when in fact it is not public and not optional. It is government mandated coverage with government oversight and government control.
fourdeucer on August 17, 2009 at 2:19 PM
When FDR kept getting elected while still driving the country deeper into depression. He was president for 12 years. His first 8 years the country was in a depression, the last 4 the country was at war. At least he nailed down what day we should celebrate Thanksgiving.
Tommy_G on August 17, 2009 at 2:19 PM
My father has worked for GTE (now Verizon) for longer than 26 years and let me tell ya: Competition isn’t always awesome in every industry, especially a utility that people need (IMO). Wages have decreased, work load has increased, teams have been under cut, benefits have been cut, managers are over loaded, and you can’t really compete in an infrastructure market because you can’t pull up all the phone lines from the old company and replace them. Competition to make cool stuff like TVs is great but people appear to lose overall when it comes to basic utilities.
The Calibur on August 17, 2009 at 2:20 PM
This is basic Econ 101, or at least it was when I took Econ 101.
I have some real problems with how the video itself was put together though. Much of the text that flashed up was a distraction from the voiceover, rather than a reinforcement. Changing the dialog to more closely match the text would go a long way towards making this video more watch able.
Buford on August 17, 2009 at 2:21 PM
AnninCA: Consider prominent examples of “competition” between private enterprise and the government.
1. USPS vs. Fedex, UPS, etc as you suggested
Competition is strictly limited by federal statute. If private companies were allowed to deliver first class mail, the USPS would be largely abandoned. The only reason private companies have flourished in the parcel business is that the USPS has done such a bad job in it. Is this the exemplar of government run health care that is your Utopia?
2. Public education
Competition is very grudgingly allowed, and the public employee unions fight to the death to limit it as much as possible.
This brings up the larger issue in any hypothetical private-govt competition scenario. No matter what “fair” rules are put in place to give nominal competition at the beginning, the government can change those rules later either in Congress or by fiat, in either case under pressure from public unions. Private business cannot flourish under such risks, which is exactly why the Obama administration is so bad for the economy overall.
jwolf on August 17, 2009 at 2:22 PM
You and I must have taken some right wing conservnut indoctrination economics. :)
HoustonRight on August 17, 2009 at 2:24 PM
This is because you don’t seem to understand what a Constitutional Republic is (no big surprise, there). The federal government runs the post office for one reason, and one reason only:
US Constitution Article 1, Section 8:
The Congress shall have Power [ ... ]
To establish Post Offices and Post Roads;
The federal government is limited by the constraints of the Constitution. That’s the whole reason we have a Constitution. If Congress had not been instructed to establish Post Offices, then there would be no federal Post Office.
The “competition” argument is idiotic, at best, as it totally disregards the architecture of our government and the rules established, therein.
Of course, the moron in the White House doesn’t know jack about the Constitution, either (thanks Harvard), which is why he gives un-Constitutional arguments for his moronic ideas. On top of that, he fails on the competition argument, too, as one would expect from a retard who talks about “profit and earnings ratios”.
You don’t say.
progressoverpeace on August 17, 2009 at 2:27 PM
That should be “Before AT&T’s breakup.” And, of course, though the mobile camera phone was developed long after the breakup, video phones and cellular phones date back before it.
calbear on August 17, 2009 at 2:27 PM
With GM and Chrysler you are correct. The government did not permit them to die the gradual death that a large but unprofitable company suffers (protectionism, Buy American in gov’t procurement, etc.), but they also never let them fully live (mandatory dealings with the trade unions). Had capitalism been allowed to operate on these companies over the last 40 years, they’d have either stopped failing, or become so small by now that when they did fail it would hardly matter.
Fannie and Freddie were government institutions from the start, however, so they don’t belong in the list.
hicsuget on August 17, 2009 at 2:28 PM
Bingo!
As an Evildoer who works for a health insurance company, let me assure you, this is a fact. Shooting from the hip, I’d estimate that if these government-created hinderances and mandates were removed, we could lower our rates by 30-40%.
All the costs associated with “compliance” with gubermint regulations & mandates produce NOTHING of value. They add ZERO to America’s GDP.
P.S. This is my first post at HotAir! Yeeha!
FlatlanderByTheLake on August 17, 2009 at 2:29 PM
They were sold as quasi-government institutions that would not be backstopped by the federal government, just like the “public option”, so they belong in this list more than any other.
No Fannie Sick! It’s un-Constitutional, un-American and exceedingly stupid.
progressoverpeace on August 17, 2009 at 2:31 PM
That’s why our economy is stalled right now…who wants to INVEST right now when they dont know if the turd in office will attempt to take over that industry next!!
Asajj Ventress on August 17, 2009 at 2:12 PM
Who is John Galt?
TN Mom on August 17, 2009 at 2:33 PM
I am quite enjoying the competition between Comcast and ATT, both financially and the services I receive.
Being in charge of getting internet access at my business locations, the choices I have are great and service improvements are happening quite briskly.
The closet I get to agreeing with you is electricity and gas. I would rather have a non-profit company manage the infrastructure and all companies that provide energy and gas must purchase shares of the infrastructure company.
WashJeff on August 17, 2009 at 2:34 PM
I’m not sure this is accurate. Fannie was made in 1938 as a fully government organization. Later, in 1968, LBJ (I think) made it a GSE (i.e. my friends run it and make a profit.) Then Freddy was created to expand service and create competition. Well we see how that worked out.
The Calibur on August 17, 2009 at 2:35 PM
Sold to the same people that bought the Golden Gate Bridge.
WashJeff on August 17, 2009 at 2:35 PM
The cost difference of inefficiencies are solved with either tax subsidies or some form of monopoly market or both for the government company.
the_nile on August 17, 2009 at 2:37 PM
You think that there were explicit government guarantees on Fannie/Freddie? There were not. That was a big part of the whole discussion back when the bailouts for them were being considered. The federal guarantees were implicit, and most assumed that the federal government wouldn’t let Fannie/Freddie fail, but that was all unwritten assumption.
progressoverpeace on August 17, 2009 at 2:40 PM
Ann,
Nothing seems to make sense to you. You keep talking about health care prices being unnaturally high. Do you have any idea how prices work? Or what the public option is?
Do you think private insurers are keeping health care prices high so that they have to pay out more in claims? Is that really what you think?
do you think price controls will work? (that is the only way that a “public option” would bring down actual health care costs).
We are either discussing the costs of health care – which the insurance companies do not controll and have every incentive to keep as low as possible – or we are discussing the costs of insurance premiums. Which are you addressing? You seem to be addressing insurance premiums as you are parrotting Pelosi’s talking points that insurance companies are evil. So, if you believe that, and believe the insurance companies are keeping the cost of HEALTH CARE high, why would they do that, since they are the ones who pay for the health care?
If you are arguing that the insurance premiums are high and could easily be lower – how do you figure? Do you believe that all of the insurers are colluding to keep premiums high even though you believe they could charge 1/2 of what they are charging and remain in business? Why wouldn’t some company figure out that if they simply offered the 1/2 price premiums they would steal all of the customers and make much more money?
Or, are you somehow arguing that the insurnace companies control health care costs (i.e., hospital and doctor bills, medicine costs). If so, why would the insurance companies, who have to pay those costs, want to keep those costs high? What benefit would it be to them?
If you attempt to honestly answer any of these questions rather than giving your regular “I don’t understand how you can say that” and pretense of being conservative, I will be shocked. But, as can be seen by my questions, your position makes no rational sense.
The only way for a “public option” to control costs and compete would be to fix prices and/or ration care. And, fixing prices always ends up resulting in rationing of product. So, how exactly does a public option lead to lower health care costs?
No serious person believes that, I don’t know how you can state it with a straight face.
Monkeytoe on August 17, 2009 at 2:41 PM
There was a phrase commonly uttered by those of us under the thumb of Ma Bell’s monopoly at the time, “were the phone company, we don’t have to care.”
Once the monopoly was broken and competition came they were forced to care, innovate, and bring down their prices. I experienced a similar situation when I moved to AZ in 1993. When I bought my first home the only phone company in the state was US West (now Qwest) and they said it would take upwards of 60 days to setup my phone service, which was ridiculous yet they didn’t care.
Now that there are several phone service providers in AZ it never takes Qwest 60 days proving competition does work to push providers to improve their service, products, and innovate whereas any government run system is just the opposite, there is no incentive to improve service, innovate, and cut costs because they are the only player in town yet the left (as usual) fails to see this fact, something that should be as plain as the nose on their faces!
Liberty or Death on August 17, 2009 at 2:46 PM
When you said they were sold as quasi-governmental, I thought you meant when they were created. Fannie was fully backed by the government until it was turned into a GSE, in which case, you would be correct. There is no guarantee.
The Calibur on August 17, 2009 at 2:49 PM
It’s funny how the lefties, who scream bloody murder about the need to teach evolution as law in every high school, don’t seem to understand the power of competitive forces. Of course, those same lefties have never seen an evolutionary pressure they didn’t think they knew better than, anyway. Lefties can tell us exactly which species need to be saved and which can be dispensed with … with homo sapien being the highest on their list of expendable species, if not the dreaded list of “evil species” – of which there are none other than Man.
Cognitive dissonance. It’s where the left lives.
progressoverpeace on August 17, 2009 at 2:51 PM
When liberals say the price of something is unnaturally high, they mean the price is higher than they’re willing to pay.
They seem to not understand that in a free market price simply reflects demand and supply. Thus the issue is to either bring down demand or increase supply. Free markets do both through competition which promotes efficiency and development of alternate means of supply. Governments do neither and instead only attack price by applying price controls as if setting a different price changes the underlying reality of what caused the “high” price in the first place.
PackerBronco on August 17, 2009 at 2:51 PM
That image of folks waiting in line at the Dept of Motor Vehicles office is a view into the future of visits to your doctor’s office.
I cannot even believe we have a government that is pushing us that way.
FireBlogger on August 17, 2009 at 2:53 PM
Yes. I was only referring to their modern incarnations, after which they became serious threats to our economy and financial system. I should have been more explicit.
progressoverpeace on August 17, 2009 at 2:53 PM
That can’t be true. Look at how good were Soviet automobiles.
Johan Klaus on August 17, 2009 at 2:56 PM
When they’re open. No one has mentioned, in the whole post office/health care idiocy of The Precedent, that the Post Office just announced a shorter service week and they are closing 1000 post offices.
progressoverpeace on August 17, 2009 at 2:56 PM
And the East German autos were “to die for”.
Johan Klaus on August 17, 2009 at 2:57 PM
This technically isn’t true. Supply and demand mechanics determine how high someone will go to pay but not how low. This is evident during Christmas. When a toy sells off the shelf, they do not change the price of the other duplicate toys every time. This only happens with necessities, because the people that own them can charge what they like, regardless of whether it costs more to extract certain resources. Similar to oil prices: One could just buy a bunch of oil, which makes producers choose to raise the price because they can, not because it’s necessarily more expensive to extract. Afterward, the person that bought and held much oil can then just sell the oil at a higher price to make money. This is how financial bubbles occur.
The Calibur on August 17, 2009 at 3:01 PM
Even better, look at how great they were at exploiting the vast resources and wealth they had. They couldn’t even build a decent delivery system to get food to the cities without half of it rotting or being rendered unusable. They couldn’t manage to drill their own oil, either.
Capitalism and p[rivate property are needed to build large, complex infrastructure that centralized planning can never do, since the tasks require thousands of independent trials (with many failing) in order to end up with functioning group of systems that do what they are supposed to do.
progressoverpeace on August 17, 2009 at 3:01 PM
If conservatives believe this why would they ever vote for the GOP who consistently cut those kinds of projects. The one redeemable Donk attribute is the occasional throwing of a bone to infrastructure, the stimulus of course doesn’t count. But yeah, major chunks of the left and the right may have more that they agree on than people realize.
CrankyIndependent on August 17, 2009 at 3:10 PM
“Sales” are prices being driven lower due to lack of demand, or to stimulate demand. It has nothing to do with being a necessity, though elasticity is affected by how much one “must have” something.
Pushing the spot price up in order to sell later is not really the mechanism of bubbles. When one dumps the oil, it goes back to the market and depresses the price. Financial bubbles occur for many different reasons, but cornering a market (of something of the sort) is not the main reason. Financial bubbles tend to be emotionally-driven, for the most part, though bubbles can also occur for no reason other than a poor confluence of unemotional events.
here’s a classic bubble architecture:
You and I own 100 shares each in a stock that has nothing but $200 cash as the company. Our shares are worth $1 each, as that is all the company is. I buy one share from you for $3. Now, marked to market, my 101 shares are worth $303 and your 99 shares are worth $297, so we have created $400 in illusory capital, which I go to a bank and borrow against to buy something else. If I need more cash, you can just buy the share back from me for $7 and we have created $800 more, out of thin air. Bubbles away! Then there are just the idiot bubbles, like the Dutch Tulip bubble.
progressoverpeace on August 17, 2009 at 3:13 PM
Capitalism… it’s better for the environment.
Chaz706 on August 17, 2009 at 3:16 PM
Are you claiming that republicans never vote for or fund capital projects? I find it hard to believe you would make that claim. and, again, just b/c capital projects can be good does not mean ALL capital projects all the time are good. Bridges to nowhere aren’t any good, for instance. So, I’m not really sure what point you think you are making.
Monkeytoe on August 17, 2009 at 3:17 PM
progressoverpeace did a better job than I re: Fannie and Freddie.
As to the automakers had they been allowed to go into bankruptcy, the suppliers and the UNIONS would have been forced to come to the table to negotiate prices, wages and benefits. The UAW has some of the best benefits in America and thus drive the price of autos higher than their counter parts.
The Democrats in the House, Senate and Whitehouse could not abide the unions accepting less in wages and benefits, therefore bailed them out and in the process put the American taxpayer on the hook not only for the wage, benefit package but also I fear for their nearly bankrupt and unsustainable pension plans. This is the greatest ripoff of the American taxpayer ever and the ramifications have hardly surfaced yet!
Spread the wealth indeed from American taxpayers to Dem. constituent groups.
Unions, ACORN, Organize For America Now all got stimulus money I believe!
My kids generation may pay for the folly that is the current political class in D.C. I may be gone before the full effects are felt and I am 53.
dhunter on August 17, 2009 at 3:18 PM
Welcome, fellow evil-doer!
Greg Toombs on August 17, 2009 at 3:19 PM
Bingo. I have been going round and round with a couple of relatives using very similar points.
The most jaw-dropping thing about this whole health-care issue is the obtuseness of so many Americans about the real source of American abundance. Far too many Americans apparently have no earthly idea what built this prosperous, free country that is the sincere envy of the rest of the world.
HINT: it wasn’t your rule-decreeing, regulation-loving, financially-challenged congressman who built this thing. That congressman should subsequently not be allowed to wreck health care as we know it — for me and for millions of others, this line in the sand has been drawn.
Edouard on August 17, 2009 at 3:19 PM
I would add one extra bit: The initial $25 billion authorized for the Big 3, that got mixed up with the bailout money, had nothing to do with bailouts, but was to fund retooling them in order to be compliant with newly passed federal regulations.
progressoverpeace on August 17, 2009 at 3:38 PM
Shouldn’t these principles be taught in schools (so many level of schooling) already?
/oh yeah, never mind…
Sir Napsalot on August 17, 2009 at 3:45 PM
The funny thing about this whole “health care” debate to me is that we are not debating ways to improve / make cheaper / more efficient the delivery of health care.
We are instead talking about how to a) insure everyone and b) lower the cost of the insurance.
The way to achieve “a” and “b” would be to lower the actual cost of health care. Nothing in the bills before congress does this. Instead, they try to keep the cost of insuring people down by “bending the curve” (i.e., rationing treatment).
Nowhere in the debate is there really any discussion of ways to make actual health care cheaper and more efficient. There are plenty of ways that such could be done – the first being medical malpractice reform.
Another way would be to require all medical records be kept electronically and come up w/ some kind of standard format so that those records are easily shared between providers.
A third way would be requiring individuals to pay more for routine care (i.e., removing the 3rd party payer problem to a limited extent).
Another way would be to ease up on requirements that E.R.s treat everyone. E.R.’s should only be required to treat life-threatening injuries if the person can’t pay or isn’t insured.
Doing something about illegal immigrants could help as those costs are passed to the rest of us.
We should be debating ways to address the high costs of medical care, which is the root of the issue.
then, we could also add on ways to help reduce the cost of insurance – i.e. letting insurers compete across state lines.
Monkeytoe on August 17, 2009 at 3:45 PM
You just can’t argue that keeping prices higher is good for the country because free enterprise keeps prices lower.
The argument is illogical.
AnninCA on August 17, 2009 at 4:01 PM
Government spending absolutely hurts the economy but that’s not what is causing our current economic mess.
The federal reserve giving away free money is.
bingsha on August 17, 2009 at 4:10 PM
The govt. should only provide for “public goods.” They are a particular form of good that the private sector will not produce because ease of access without a proper recourse for repayment or fee. This prevents companies from being profitable in providing them. Hence, they are not provided by the private sector.
Think highways: If they would put them in the right spot and go ahead and pave them. The demoncrats have been very good over the years at “paving.” But, they put roads in the wrong places and keep paving the same spot.
A proper “public good” provided by the govt., say a highway in the right spot, will have a multiplier effect on the economy of more than a dollar gained for a dollar spent.
Outside that the govt. virtually always shrinks the economy in every instance of every venture in which it dabbles.
trollkiller on August 17, 2009 at 4:16 PM
Ann, economics, medical treatments and knowledge of the insurance trade is not one of your strong points, is it?
Insurance companies keep medical treatment prices high just for the hell of it?
I never knew that.
Next time you need a CAT scan, just ask the attending physician to simply pass a magnet over your body and see if anything shows up. It’ll be a lot cheaper than a state-of-the-art CAT scan, that I can assure you.
coldwarrior on August 17, 2009 at 4:21 PM
daesleeper on August 17, 2009 at 4:25 PM
The fact is, as LittleAnnieFanny and Dhimmicrats in general fail to grasp, that the stamp is costing us more than 44¢ because our tax money is propping the USPS up.
It’s time to kick out the props and let the market compete on a level playing field.
davidk on August 17, 2009 at 4:28 PM
Sorry, Calibur, but GTE was never part of the Bell system. GTE was always an Independant Local Exchange Carrier (ILEC) and was not part of the AT&T Divestiture agreement of 1/1/84.
I started with New England Telephone in December of 1979. NET was part of the AT&T network and we were divested from AT&T on January 1, 1984 as a result of Judge Greene’s decision. We became an RBOC, or Regional Bell Operating Company and were called NYNEX. New York and New England.
GTE spent the next 20 years or so buying up many other ILEC’s, such as Contel, so by the time NYNEX merged with Bell Atlantic, and then Bell Atlantic aquired GTE and became Verizon, GTE was pretty huge. But it was still an ILEC before the merger with BA.
I took a RIF last November, so trust me I know how bad it is for management at Verizon. But I had my 75 points so I walked away with what was left of my pension. So I was luckier than most.
If I’d known Verizon would sell off most of the West and get rid of most of the GTE network I may have stayed. I have never seen such a horrible, backwards, ridiculous, excuse for a telecom network in my life. I pity the poor souls at Frontier who are gonna have to deal with it.
Jaynie59 on August 17, 2009 at 4:39 PM
And yet, my point is not really addressed.
You can’t have it both ways.
AnninCA on August 17, 2009 at 4:40 PM
With regards to the above posts about monopoly, there are cases for monopoly: Drug patents for instance.
But, the case for monopoly is built upon cost curves whereby a monopoly provides the best service at the least cost.
As an aircraft guy, airlines are an example. There has never been an airline that found the bottom of the variable cost curve. In fact, there has never been an airline profitable over the long run.
Economic analysis indicates that the cost of aircraft maintenance is best served by a one airline world monopoly — though I’m not sure if I would want to fly on one of their errorcraft unless they were US maintained.
trollkiller on August 17, 2009 at 4:49 PM
@Ann
Some choice quotes from Lady Thatcher’s speech to Greater London Young Conservatives 1977 Jul 4.
It doesn’t directly address ‘health care’, but indeed addresses central control.
daesleeper on August 17, 2009 at 4:56 PM
Fireblogger
Exactly, they are not counting waiting in line as a cost. If they would have to include that in their cost estimates. The public option gets real expensive real quick.
trollkiller on August 17, 2009 at 4:56 PM
I’ll address your point: it is not the case that in a private healthcare system the prices are unnaturally inflated; it is the case that with a public competitor the prices would be unnaturally deflated. The “natural” price level is precisely the one which is arrived at in the absence of government interference, so you would be correct in surmising that the argument based on the “natural” price level presented above is question-begging.
Unlike a shill for either party, an economist looks at what the function of the market’s setting of the “natural” price level is, and, having looked, decides that allowing the market to set the price is beneficial.
I’ve read it, and I have to say it wasn’t very good. Liberalism by von Mises is much better.
The supremely useful feature of capitalism is not that it allows a creative, innovative, well-run firm to prosper, but that a firm which cannot prosper goes out of business before it wastes more scarce resources.
hicsuget on August 17, 2009 at 5:03 PM
Several people already provided ample points that addressed your “question/assertion.”
Medical insurers DO NOT keep health care costs overly inflated, why would they when it is the health insurers that LOSE when having to pay out higher medical care costs! It is your illogical that is flawed AnninCA.
Also, I seem to remember several weeks ago questioning some of your assertions regarding the healthcare debate to which you had no response. In particular I asked how anyone with a functioning synapse, an honest bone in their body, or someone not blinded by their ideology and allegiance to “THE ONE” could possibly think for a nano second that ANY government agency could provide a health care system as efficient, cost effective, and innovative as the private sector can!
I challenged you to cite and provide actual facts where the government has ever successfully run ANY type of service better than the private sector and you never did, so until you do you have no business telling people they have “not addressed” your points when in reality several have yet you never do!
I’ll give you some assistance to narrow your search; the following ARE NOT GOOD EXAMPLES OF GOVERNMENT RUN INSTITUTIONS:
MEDICAID
SOCIAL SECURITY
AMTRAK
USPS
IRS
BANKS
GM
FANNY/FREDDY MAC
Liberty or Death on August 17, 2009 at 5:04 PM
Good Points. And thanks for that link! I’ll be putting that in my queue.
daesleeper on August 17, 2009 at 5:06 PM
What does that even mean? How low someone is willing to go? Someone willing to go to zero. We’d all prefer to get someone for nothing. The seller would prefer to sell it for as much possible. The price point represents the compromise between those two desires.
No. You can only charge as much as people are willing/able to pay. And you have to be careful to not charge more than the next guy.
Right that process of buying a “bunch” of oil is called increasing the demand.
Only if in so doing they were able to reduce the available supply, which is not as easy as you seem to think. For example if the price of oil goes too high, then other economic forces come into play. People buy more fuel-efficient cars because the price of gas has shot up. It becomes more economical to invest in alternative sources of energy such as oil shale and gasification of coal.
(with respect) I figure you had a point to make in your post, but I’ll be darned if I can figure out what it is.
PackerBronco on August 17, 2009 at 5:13 PM
If a farmer growing his own corn for his own cows effects the corn market nation wide . . . .
- The Cat
MirCat on August 17, 2009 at 5:14 PM
YOUR belief is incorrect. Please name one Republican who believes the private sector can do no wrong.
xblade on August 17, 2009 at 6:42 PM
I’d say you’re the who doesn’t understand. You basically said the same thing Ed did, only it took you about 3 times as many words to do it.
xblade on August 17, 2009 at 6:46 PM
Which makes sense, considering many basic utilities(water, electricity) are government run.
xblade on August 17, 2009 at 6:58 PM
Ann,
What point do you claim to have made?
You seem to be claiming that the insurance companies are who make health care costs high (i.e., hosptial stays, surgeries, etc.).
I asked you a series of questions above, which you dishonestly avoid and post inane little one-liners, which seem to indicate you don’t have above a 3rd grade education.
answer a question – do you believe that the insurance companies are what make and keep medical costs high?
If yes, how and why?
If no, then how do you believe a gov’t run insurance program will lower medical care costs? And if your answer is something as inane as “it will keep them honest” or “it will provide competition” then follow up by explaining how the gov’t run program will provide competition that other insurance companies do not provide?
And, how the gov’t run program will be able to compete without using any tax payer money?
Thus far, all you have said is “I don’t understand”. You don’t need to say that – your “arguments” have demonstrated that amply. Your refusal to answer questions and engage in an actual conversation demonstrates that you have no real understanding of the subject matter other than the simple platitudes you hear at DailyKOS or elsewhere.
Try thinking through the issue and answering some of the questions posed to you in an effort to engage in an actual dialoue. If you can demonstrate even a basic graps of the issues involved, you may gain some credibility and not be a waste of time on this board. Unless your only objective is to annoy rather than debate or persuade, which seems to be the case.
Monkeytoe on August 17, 2009 at 7:38 PM
AnninCA:
You can lower the price of a good or service to any level you please. You could sell everything in your store for a dollar if you wanted.
But you know this would not work, for this reason:
Price is not synonymous with cost.
No matter how low or high your price, your cost to produce those services is relatively stable. When government tells you they want to control costs, they erroneously mean prices. If they wanted to lower costs, they have multiple means including deregulation and reducing the burden on employers to pay.
Please explain to me the logic in paying a doctor $15-25 for an hour of their time? Such a copay is idiotic and does not represent the actual cost to procure the service. The insurance company picks up the rest of what they allow. Doctors could afford to have lower prices provided they got more money up front instead of wrangling with the insurance company and waiting 3 weeks for a partial return on services rendered. There is effectively a revenue ceiling on a procedure.
BKennedy on August 17, 2009 at 11:23 PM
Just got a copy of the billing for my younmgest daughter’s last doctor visit.
$10 co-pay. Given as a credit.
$75 doctor exam. Insurance negotiated that to $50.
$65 for an x-ray. Insurance negotiated that to $35.
$30 blood test. Insurance negotiated that to $20.
The amount I owed. Zip. Nada. 0.
But the doctor continues to see the kids (well, young adults) because even “suffering” those negotiated reductions, he knows that he will get a check in the mail within five business days of providing care. Some other insurers will take a month, some longer, and a lot will require all sorts of additional paperwork. So, he discounts his services (negotiated price) as he knows he will get paid, few if any questions asked.
I find the argument that insurance companies push for higher prices to be, well, pretty stupid.
coldwarrior on August 17, 2009 at 11:33 PM
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