Ticking Time Bomb Explodes, Public Is Shocked | The Beacon

The failure of Fannie Mae and Freddie Mac, setting in motion the biggest government bailout/takeover in U.S. history, brings a grim sense of fulfillment to competent economists. After all, what did people expect, that water would flow uphill forever?

This financial mega-mess is the same sort of event as the collapse of the USSR’s centrally planned economy, another economically unworkable Rube Goldberg apparatus that was kept going, more or less badly, for decades before it fell apart completely. Along the way, of course, famous (yet actually unsound) economists assured the world that everything was working out splendidly. As late as 1989, when the pillars were crumbling on all sides of the temple, Nobel Prize winner Paul A. Samuelson informed readers of his widely used textbook, “The Soviet economy is proof that . . . a socialist command economy can function and even thrive.”

In the future, we will see a similar breakdown of the U.S. government’s Social Security system, with its ill-fated pension system and its even more inauspicious Medicare system of financing health care for the elderly. These government schemes are fighting a losing battle against demographic realities, the laws of economics, and the rules of arithmetic. The question is not whether they will fail, but when—and then how the government that can no longer sustain them in their previous Ponzi-scheme form will alter them to salvage what little can be salvaged with minimal damage to the government itself.

Our political economy is rife with such catastrophes in waiting, yet the public always seems startled, and outraged, when the day of reckoning can no longer be deferred, and another apartment collapses in the state’s Hotel of Impossible Promises, loading onto the taxpayers more visibly the burden of sheltering the previous occupants.

Each of these time bombs has at least one element in common: it promises current benefits, often seemingly without cost; but if it must acknowledge a substantial cost, it places that burden somewhere in the distant future, where it will be borne by somebody else. From the standpoint of society in general, every such scheme is a species of eating the seed corn. It satisfies the public’s appetite to consume something for nothing right now, with no thought for the morrow. It represents the height of irresponsibility by permitting people to live higher today than they can truly afford, financing this profligacy by borrowing recklessly and by taxing politically weak and ill-organized people in order to shower benefits on politically strong and well-organized special interests.

Call it democracy in action or utterly corrupt governance; they are the same thing.

The architecture of the Hotel of Impossible Promises is not arcane. All competent economists understand these things. Ludwig von Mises explained as early as 1920 why a centrally planned economy could not work as a rational system of allocating resources. The reasons why Social Security, especially its Medicare component, and many other such government programs contain the seeds of their own destruction have been explained time and again. Are the politicians who construct these structures really such idiots that they cannot understand the logic of what they are doing?

Not at all. But they are not striving to create economically viable institutions that serve the general public interest; they are feathering their own electoral nests in the only way they can in the context of our political institutions. As H. L. Mencken explained back in 1940, the politicians “will all promise every man, woman and child in the country whatever he, she or it wants. They’ll all be roving the land looking for chances to make the rich poor, to remedy the irremediable, to succor the unsuccorable, to unscramble the unscrambleable, to dephlogisticate the undephlogisticable,” because they understand that “votes are collared under democracy, not by talking sense but by talking nonsense.”

And are members of the public so dense that they will fall for such promises? Yes. Moreover, they are greedy, impatient, and immoral, because the present benefits they hope to gain via politics, however unsustainable in the long run, come entirely at the expense of the taxpayers from whom the government extorts its revenues.

“Politics, under democracy,” Mencken wrote more than 80 years ago, “resolves itself into impossible alternatives. Whatever the label on the parties, or the war cries issuing from the demagogues who lead them, the practical choice is between the plutocracy on the one side and a rabble of preposterous impossibilists on the other.” And in a declaration even apter now than it was at the time, he concluded that what democracy “needs beyond everything is a party of liberty.”

The trouble is, however, that now, even more than then, the American people have little interest in liberty. Instead, they want the impossible: home ownership for those who cannot afford homes, credit for those who are not creditworthy, old-age pensions for those who have not saved, health care for those who make no attempt to keep themselves healthy, and college educations for those who lack the wit to finish high school. Moreover, they want it now, and they want somebody else to pay for it.

If you think that Fannie and Freddie’s bust is a big deal, just wait until Medicare comes crashing down. Then, the wailing and gnashing of teeth will be truly unbearable. As that day rapidly approaches, however, you’ll notice that the politicians are doing utterly nothing to forestall it.

kolu, I had the opportunity to hear David Gergen speak this past week, and he spoke of gathering storms the US will face in the next decade. He mentioned that we've all but forgotten that all the boomer babies are just about to need everyone else to pick up the tab for their social security payments, since there is truly no trust fund.

It was rather unnerving to ponder many of the things he spoke about.

I suppose this isn't really election related, but so important IMO!

A VERY good read for anybody who bothered to read it. Here's the cliff note version:
We're all fawked!

I have said it before and I will say it again. . . .the politicians are ALL on the same side, and it is NOT ours!

The two party system we have in this country is a joke! I made a cheesey analogy in another thread about Obama promising free pizza. Guess what? PIZZA ISN'T FREE!!!

I really don't know when the American public is going to wake up. The whole Dems vs Repubs thing is nothing more than a divide and conquer strategy. Oldest trick in the book! I will vote McCain only because I am tired of wasting my vote and that Obama has rose so quickly through the ranks that it just goes to show that he is really good at playing the political game. That, more than anything, is SCARY to me! Until the American public is ready to do something that represents REAL change, I have to play within this mock Pepsi vs Coke thing.

__________________
"No one believes more firmly than Comrade Napoleon that all animals are equal. He would be only too happy to let you make your decisions for yourselves. But sometimes you might make the wrong decisions, comrades, and then where should we be?"
- George Orwell Animal Farm

Don't worry. Anything goes on this board. It won't be long and a couple of posters will turn this into either an abortion thread, or a racist thread!

Back to your topic, it's all been coming down but now people are starting to see it. All the policiticans want is power and money, while smiling through their teeth. We keep robbing Peter to pay Paul. Peter's long been dead and they dare to take money out of his pockets! We have conditioned so many people to expect handouts.

That is what is going to hurt people most, when the gravy train does stop and they have that deer in the headlight look.

dl

I can't say that I'm surprised that this happened. I am surprised that we would consider bailing out any corporation where the government has not guaranteed the assets.

As far as social security goes, it's solvent past the time when most of us boomers will be dead. It does not have a problem. Medicare is another matter entirely.

I honestly do not believe that the public are the ones who are greedy.

What this bailout plan does is keep profits privatized while socializing the losses.

Soo, if medicare is teetering on the edge now, how in the world are we going to be able to add a national healthcare package into the fray? If we do, at what cost? To whom? When does it stop?

The first thing that we do is scrap Medicare Part D. It was a windfall for Big Pharma and not good for people who fell into the donut hole. This would allow us to negotiate the price of drugs like the VA. and also why drugs are so much cheaper everywhere else. We make sure that all of our records are kept electronically.

Each of us would pay our premiums in the form of taxes to the government. That's how you pay for it.

"We" already finance 60% of our nation's health care spending with public funds. Medicare/Medicaid are sinking us. Medicare Part D is an absolute joke and a boondoggle for drug companies. I am a Federal employee and this is something I know about with great intimacy because of the Agency I work at.

One very basic way we will realized a savings is the cost we all bare due to bankruptcies caused by medical debt. Other savings will be realized with a more healthy workforce and children who are healthy and able to learn. Additionally, providing preventative care to those who would not otherwise seek care due to the cost will lower costs because the expenses of treating major medical illness will be avoided. Untreated diabetes and the consequences of high blood pressure are HUGE costs that would be easily avoided.

Believe me, we are heading towards some sort of a system of guaranteed, basic healthcare. Medicare/Medicaid are not sustainable. We may limp along for a few more years with tax credits and denial. I have heard people say "health care isn't a right;" and, this is true from what I can read our Constitution. But, we won't allow people to die on the streets and for children to suffer from simple medical problems that, if left untreated, will prohibit them from being productive members of our society. This is where the path is leading. You can attach your wagon to the person who is either in denial or lying, or to the one who is willing to tell you the truth, and bright enough to help us navigate towards the best possible system we can create.

McSame's plan is/was to manage healthcare like Wall Street functions. Yup. Luckily, the public has finally realized some things are not suited for a market driven economy. Our basic retirement and health care are NOT ideal for a market driven model.

You really think this is where we are headed? We have coverage for people who fall into that gap, no?

Exactly. And, I don't "think" it. I know it. It is just a question of when. And, doctors and drug companies are fighting tooth and nail because they may make less money. Particularly if the system includes a pay for performance component.

If we are able to combine entitlement and welfare health care along with everyone else's basic care, we will have an economy of scale. Then, those on the edge, who forgo health care insurance and basic check ups and medication for any number of reasons, will receive care and be more likely productive in our economy. Scare mongers point to horrible systems, but there is no reason we can't create a premier system. And, there is nothing to prevent a market for plans that offer more than basic care to anyone who wants and can afford more.

You asked how a national health care system would be supported. I answered. The bottom line is the cost to our nation will not be particularly greater, and the intangible benefits will be realized along with tangible ones. Shoot, we spend SO much money on administering the medicare and medicaid programs. We could drop a number of state and federal agencies immediately.

Wait, if we can create premier systems then why do our veterans have a mess like Walter E Reed?

The government seems to screw up everythint it touches! I fear national healthcare would "dummy down" everyone, now if there was something to cover those in between the cracks, I'd have no problem with it, but why screw up everyone who does have decent coverage thorugh their employer? Why in the world would corporations even consider keeping on insurance if the government is going to provide it?

I do feel Doctors deserve their current pay considering the schooling they've invested and the hours they put in a day..my reg family Dr. puts in 14 hour days between the hospital, his practice then afterwards he takes care of nursing homes. This doesn't count his on call time. People working the line at Ford could make more than he does if they worked that many hours a day & they don't need 100K a yr in malpractice insurance. As it is, insurance companies put limits on what they will pay for office visits, etc.

France pays 45% tax for healthcare alone, on top of all the other taxation. If we had a similar plan..breaking down what I pay a month, I will actually pay MORE for what I fear will be a lower grade of coverage.

Drug companies, how much research & development do you see coming out of canada? Where is the incentive? If a government entity is going to tell you what you can max out on a product, why would you spend tens of millions in research when you don't even know if it will result in a viable product, much less if you can even recoup your expenses if you do indeed find your end result. I know as an investor I surely wouldn't want to back a company with that many restraints on their investment. Don't we all lose at that point?

Walter Reed is an Army Medical Center. Many of the problems there have to do with chain of command management issues and a lack of Army funding. Additionally, those service members receiving care there are generally a part of a military chain of command and don't have much of a voice to complain. Military medical centers are not "systems" in the sense that they operate independently and are at the mercy of being one part of a huge budget whose leaders have determined hospital funding is not a priority.

The VA is an excellent model of a single payer system, the only such system in the U.S. It provides better care than Medicare, for one-third the cost. There have been issues with getting enough doctors, which extends wait times, but as for providing care economically and efficiently, it is a good place to start to look for ideas.

Oddly, you point to France as an example. France’s healthcare system is used as a benchmark among health care systems and the last time I looked was ranked first for performance. Can you please cite the souce that indicates 45% tax ? When I researched this in 2003, employers paid around 13% and self employed people paid around 7%. There is also a 5% tax on general incomes. There is also an income cap around $100K. Other funding is obtained from "sin taxes" and pharm companies, who benefit because France agrees to buy the drugs they market.

As for your other arguments - you should get a job lobbying for the bigpharmas or the AMA. You certainly listen to their arguments.

I know personally of one company who has let go all of their research & development staff, ALL of them, they will finish up their current line of medications, then they are out of the game. This company is in multiple lines of healthcare, they see the writings on the wall with pharma & are getting out while the getting is good. This is purely from a business standpoint & since I have stock in that company, I happen to agree with them. Once you limit market capabilities, you limit the risk companies are willing to invest.

I have to run or I'd answer your other questions.

Exactly. Look at the current mess we are in with Wall Street. Corporations are now in it for the money and we have lost what is/was known as the "social contract." Consequently, we need to assure basic services such as food, energy, health care, medications, education, banking are not controlled by those who are merely looking at the "bottom line."

There is a balance. We can allow for a return on risk investment and not be controlled by those who threaten to pull out of the game if you don't give them what they want.

You forget the basic element of...We will ALL pay the price when our research & development goes south like Canada's has.

Bottom line to liberals is hate big pharm , oil & big corp at any cost, love big government, this is what defines me as a conservative, I hate big government.

Here is my source for 45 % taxation in France, their healthcare is covered under social security..

Paying Taxes in France Details - Doing Business - The World Bank Group

Conmpare that to the percentage we are paying here..

Social Security Update 2008

And you tell me where the free lunch is. I could go out & buy personal insurance & still pay less.

If you "hate big government" you probably need to close your eyes for a while ... The current administrations fascination with allowing the markets to control everything has put us all into a world of hurt.

From your posts, I take it you lean towards McCain/Palin. Isnt' one of Palin's big selling points is that she's a maverick and isn't letting big oil push her around ???? Is she a liberal now?

I don't fall prey to scare tactics - be they from Bush, McCain or a CEO of any corporation.

The France link didn't work for me. But, again, why would we A GREAT NATION, expect to develop something that is not also the best?

The SS is not okay because it isn't supporting what it is costing us. No where near. That is the whole problem. Medicare/Medicaid are killing us, so we need to change something. A national health care system is a natural progression. It will happen sooner or later.

I am super glad you can afford a great health plan that you can afford. I can, too. That just isn't the point.

Those who are poor DO have coverage, so the letting people die in the streets just doesn't fit.

I did not make myself clear. I said we already provide care -- we already finance 60% of the care provided to our citizens. We aleady have basically socialized healthcare. Because ---- we won't let people die in the streets, etc.... That is the point.

We will (not may) combine it all and put it into one big system where others will also benefit from the system. It is just a question of when.

McCain's plan is to tax your health care benefits and then do a tax credit with --- you guessed it -- depend on market forces to take care of the rest. It is a quick fix and won't work long term.

Wait for it....any second now.....

__________________
I'm the kind of woman when my feet hit the floor in each morning, the devil says "Oh crap, she's up."

Not sure how this will C&P since it's a chart..

Social security contributions 1 online filing 80 gross salaries 45.6%
Corporate income tax 1 online filing 26 33.3% taxable profit 8.3 %
Payroll tax 1 - 5.1% gross salaries 5.7 %
Business tax 1 - 1.5% value added 4.4%
Fuel tax 1 - per liter 1.3 %
Vehicle tax 4 - 0.1
Stamp duty 1 - small amount
Value added tax (VAT) 1 online filing 26 19.6% value added not included

These are some SERIOUS taxes! Meanwhile, they have been in deficit for every single year it has existed since 1985 Nearly 1/5 of the population is no longer covered. They have to pay for their health care. The French health care system is no longer free. There are co-pays and doctor visit fees... just like here in the US.

Why did they do this? Because the system was failing, and they had to cut cost. The government is not a giant bank that we can draw an infinite supply of money to pay for our health care.

The French system has been costing the public over 45% of their income in taxes, while at the same time reducing services, or increasing out of pocket cost. That... is a system that spells disaster. That is why I do not support a national healthcare plan.

do those also include a pension, college, child care, etc? I don't know their whole system, but I think we "pay" for many of the things the French pay for collectively. The theory being they all take care of each other. I don't know if that would work for us, because our nation is nothing like France. But, those taxes aren't just for health care....

I can't really argue the merits of any particular system because I just know enough to know many country's citizens are quite happy with their health care systems and that we could possibly develop a system that will be the best of the best. From a personally selfish standpoint, I like my healthcare just the way it is. I have excellent insurance! Your tax dollars pay for most of it So, thank you.

I did find this thread about the French system. The Informed Reader - WSJ.com : Is French Health Care Really Better? It looks like it addresses the positives and the negatives. But, I don't know for sure. It is the WSJ, so it isn't a totally crazy site. I did find the posts from a few US citizens who have experienced the French system interesting

"Believerinfacts is right on the money. The facts are simple. Socialized medicine countries (France in particular) not only have better health outcomes, they are much more efficient. Many spend the same per capita on health care as the U.S. government, but provide health care to the entire population while the U.S. only covers approximately 50% of the total U.S. health bill. They also spend much less on paperwork and overhead.

I used to be 100% anti-socialized medicine until I lived in France. There I found out that the health care was excellent, I didn’t wait in line any more than in the U.S., and the price was at least half or more cheaper than the U.S. I would recommend that people get the facts themselves because they are quite clear. The health care lobby has obfuscated the facts so that people who are free marketers like me reflexively believe their propaganda. However, a close examination of the issue will shed light on the fact that clearly countries like France have superior health care systems. Philosophically, I don’t like that, but the facts are telling me it is true and therefore, I have no choice but to strongly support single payer health care now.

Comment by JB - July 2, 2007 at 12:56 pm
JB is right. I also used to be skeptical of “socialized” health systems. But facts are facts and ideology shouldn’t trump them.

The bottom line is that France, Germany and other modern nations provide much better health care, including life expectancy, infant mortality, quality care, and shorter waiting periods for critical care for as little as half the cost of the U.S. system.

Ideologues on the right can grasp at straws with theories about “population density” etc, but the bottom line is that the U.S. system spends billions of dollars and thousands of smart minds trying to deny care and cost shift because that’s how the incentives are structured.

Comment by Concerned Citizen - July 2, 2007 at 1:14 pm "

Interesting link:

CNN.com - Paging Dr. Gupta Blog

Several things come to mind.
Their health care is connected to their Social Security. So how much does a person drawn in SS in France, cost of living,inflation rate, etc?

Also the way it works is that individuals in France can (and most do) buy "other" medical insurance. Not just only having the government insurance.

Also is wage control in place? Does the government set a wage ceiling on how much a doctor, nurse, etc can make?

One reason, I do not think it would work here in the US is because Congress would not keep it's hands off the money. The main reason that SS is in critical shape is because of the IOU's from Congress taking the money for other things.

Another site I found that I need to read more indepth:
Expats in France: Health Insurance (La Sécurité Sociale) and Doctors in France

I believe this is true as I read one article about a Dr having a BP patient come in every month for monitoring so he could bill the gov. more. Ceiling per say? Not sure, but max on what they can rec. per visit.