Some Chicago Boyz know each other from student days at the University of Chicago. Others are Chicago boys in spirit. The blog name is also intended as a good-humored gesture of admiration for distinguished Chicago School economists and fellow travelers.
Vitaliy Katsenelson writes worthwhile content for those interested in investing, art, classical music, and philosophical thoughts about life in general. See his recent post about coveting and envy.
Doggedness, canine and human.
A piece about skateboarding and flying, with thoughts from St-Exupery.
Speaking about flying, TxRed the Cat Rotator writes about some of her aerobatic experiences.
In early 2020, Joe Biden advised coal miners facing unemployment to learn to code, saying:
Anybody who can go down 3,000 feet in a mine can sure as hell learn to program as well… Anybody who can throw coal into a furnace can learn how to program, for God’s sake!
I critiqued this ridiculousness in my post Shovel That Code. (Does Biden think that coal miners stoke furnaces?…That stoking furnaces is a big factor in today’s job market?)
Comes now Obama associate Rahm Emmanuel, with precisely the same advice to unemployed retail workers.
There’s going to be people, like at J.C. Penney and other retail [outlets]. Those jobs are not coming back. Give them the tools, six months, you’re going to become a computer coder. We’ll pay for it, and you’ll get millions of people to sign up for that.
There is not an infinite demand in the US for entry-level programmers. Much offshoring of programming work is taking place…see my post about telemigration…and automation of programming work, which has been happening since the introduction of assemblers and compilers in the mid-1950s, is ongoing.
In my post about Biden’s learn to code comment, I said:
Can you imagine what these people would do to the economy if they ever achieved the degree of power that they so avidly seek?
We may find out, although hopefully the Senate will provide some degree of sanity check.
Why I Like Ike. The Greatest of the Greatest Generation followed by the Worst of the Worst.
—-
Dwight D. Eisenhower served during the Great War, lived through the Great Depression, and led the Allies to Victory in WW II. But perhaps Ike’s greatest contribution was his leadership as President of the United States, ensuring the peace and building America’s infrastructure while imposing additional sacrifices on his generation to eliminate the WWII debt burden, the failure to do so after the Great War being the primary cause of the next. His hard won legacy of freedom and democracy has been completely squandered over the last half century by fiscally irresponsible Baby Boom politicians.
The Clinton Administration cut the deficit every year, averaging only .8% of GDP, the lowest since the Eisenhower Administration, leaving the budget in what was predicted by many at the time to be a permanent surplus. But the deficit during the Obama/Biden Administration averaged 5.9% of GDP, the largest since WW II, increasing the outstanding debt accumulated over the centuries by 70% and now exceeds 100%, the level at the end of WW II. The CBO projects that under existing law, including repeal of the 2017 tax cuts in 2025, that will double again to 200% of GDP over the next generation as the $200 trillion in unfunded liabilities continue coming due. State and local governments face similar unfunded liabilities that they are prevented from borrowing to fulfill, so subsequent federal bailouts as currently demanded will add to these federal totals. This CBO forecast implies declining middle class/middle age after-tax incomes even as debt and deficits balloon.
It tricks its way in and infects the vital organs.
Obamacare promised to reduce the cost and improve the availability of health care services in the U.S. without reducing the quality, generally considered the world’s best. By traditional metrics, e.g., the health of the American public, the cost, and the share of national resources devoted to healthcare, Obamacare is a total bust. As with any government program targeted to a single metric, a higher percentage of the population has insurance, whatever the cost or coverage, but even that has been declining since the enforcement mechanism, a grossly excessive individual mandate, was eliminated.
Obamacare made some households feel more financially secure, others less so. But it’s an illusion from a broader perspective as federal, state, and local finances are virtually all unsustainable. The federal government spent about $1.5 trillion on health care in 2019 and states about $300 billion. Handing out stacks of newly printed $100 bills to assist households with medical bills would have been a much cheaper and simpler solution.
The current Rube Goldberg monstrosity reflects the attempt to achieve the universal coverage and uniform quality of national health systems while maintaining private medical services and private health insurers under the misleading banner of “insuring the uninsured.” Many analysts believed Obamacare was purposely designed as a Rube Goldberg contraption intended to end with a “bang,” paving the way for “single payer” or “Medicare for all” – the current progressive goal. But like virtually all failed government programs, Obamacare whimpers on.
To repeal and replace would admit the obvious. But the “single payer” and “Medicare for all” proposals aren’t an actuarial insurance fix, merely a progressive federal tax. Their perceived merit is eliminating insurance company administrative costs (and administration), profits and actuarial premiums with political premiums – payroll taxes that contribute to total Treasury tax revenue. Politicizing the premiums will further politicize provider payments, two steps toward nationalized healthcare, the likely goal of many proponents.
Socialized national healthcare may be preferable to it. But politicians deny and mis-represent the European national healthcare systems’ inferior medical performance and deny the totalitarian necessity even while issuing multiple mandates and threats under Obamacare. The original separation of the private and public healthcare systems in the U.S. the original “public option” – is another, arguably better option.
The Winding Road to the Obamacare Dead End
In a competitive market economy health expenses would largely be paid from personal precautionary savings or medical insurance, the premiums sufficient to cover actuarial claims according to the “law of large numbers” for unpredictable claims, with insurance reserves for worse than predicted experience, e.g., due to a pandemic. All insurance requires a degree of “assurance” to mitigate avoidable claims, a “moral hazard that the insured will take greater risks.
The U.S. health insurance industry in the early twentieth century followed the path of the savings bank industry of the prior century. Individual not for profit (mutual) firms (Blue Cross and Blue Shield) started appearing during the Great Depression for employees (initially teachers). The big expansion came when during WW II, FDR, no stranger to fascist business methods, capped wages but not benefits creating a loophole for un-taxed employer health insurance benefits that persists today, an advantage over individual plans paid mostly with after tax income.
Health care needs of the poor were addressed by a variety of public, civic and religious institutions. During the first half of the 20th century, driven largely by public health concerns, municipal hospitals provided health services but with independent fee for service doctors, whereas housing policies followed the fascist Wehrmacht model, paying private developers and builders to construct public rental housing.
Public healthcare, like public housing, was definitely below average. But the World Health Organization (WHO) Constitution of 1946 declared “enjoyment of the highest attainable standard of health”—defined as “a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity””is one of the fundamental rights of every human being,” reaffirmed in the 2020 Democratic Party Platform.
Similarly, in market economies housing structures are considered a capital investment financed with debt or equity, owned or rented. But the United Nations identifies adequate affordable housing and secure tenure as a “fundamental human right.”These assertions followed the destruction of WW II and rise of European “democratic socialism,” but were foreshadowed by FDR’s New Deal policies during the Great Depression and his Second Bill of Rights in 1944.
European national Healthcare systems reflected this uniformity, with one standard for all under Britain’s system, whereas the French system allowed about 10% of the population to opt for higher quality care with private insurance.
The U.S. went in the opposite direction in the 1950s and 1960s. Federal expenditures for housing and health services were increasingly directly subsidized with federal progressive taxation, less intrusive to the private sector than prior methods or European systems, albeit more so than subsidizing income directly. The advent of federal Medicaid and Medicare subsidized insurance led to the decline of public hospitals (as did the movie “One Flew Over the Cuckoo’s Nest.” ) But the Budget Act of 1974 making expenditures more transparent shifted lobbying efforts to less transparent tax subsidies and to regulation by the Administrative State.
So progressives targeted finance and insurance, where the subsidies are often opaque. The objective became achieving a socialist incidence of both cost and delivery of health services by subsidizing and manipulating the private insurance market. The problem with FDR’s freely granting of multiple “rights” including healthcare and housing during this “fireside chat” was that they were not his to dispense. Progressive “rights” are nothing more than meretricious socialist promises implemented with a totalitarian stick that violate the unalienable rights in America’s Declaration of Independence that are the cornerstone of a market system, the reason for multiple conflicting and confused Supreme Court decisions regarding Obamacare.
The Clinton Administration first proposed Hillarycare, the precursor to Obamacare, in 1993. When that failed, it turned to housing, where it was too successful. These latent New Deal viruses later turned deadly. Some three and a half years ago I argued that the two legislative centerpieces of the Obama Administration, the “Dodd-Frank Act” (the Wall Street Bank Bailout) and the “Affordable Care Act” (Obamacare) had the same fatal flaw. Politicians basically intervened in finance and insurance markets to provide equality of home ownership and medical care across all incomes without transparently paying the price. The effects spread like a deadly virus, distorting all the incentives, checks and balances that kept the private system afloat, replaced by universal one-size-fits-all mandates. The sub-prime lending debacle, like the Wehrmacht, lasted a decade, the current age of Obamacare (see Appendix).
The Building of a Rube Goldberg Contraption: Doubling Down on “Pre-Existing Distortions”
The current behavior of the Democratic Party and its allies in media and academia reminds me of the 1991 movie Other People’s Money. The main character, known as Larry the Liquidator, specializes in acquiring companies for the purpose of selling off their assets. When the film opens, his new target is a struggling company called New England Wire & Cable Company. Larry calls on the CEO (Jorgy) and says that by his calculations, the company would be better off from a shareholder standpoint (and hence from the CEO’s standpoint) being broken up and sold off in pieces. Jorgy,emotionally connected to his family-founded company and conscious of his position as the town’s leading employer, is appalled at the very idea and refuses to give in.
Nevertheless, Larry prevails in the resulting proxy fight, and the company falls into his hands. But there is a deus ex machina…Kate, the beautiful lawyer who has been hired to defend the company, identifies a major new market for the company’s products: the stainless steel wire cloth required for automotive airbags. (And, of course, Larry (Danny DeVito) has fallen head-over-heels in love with Kate (Penelope Ann Miller)
The Dems and their allies appear to care about the long-term existence of the US and the welfare of its people as little as Larry the Liquidator cares about the continued existence of New England Wire and Cable and its employees and customers. They will happily sell it off to miscellaneous parties…various ethnic and gender groups and pressure groups…promising those groups an appreciation in their ‘stock’, in the form of government goodies or at least self-esteem and the pleasures of righteous anger. And regardless of whether those promises are actually fulfilled, the Dems and their allies will, like Larry, collect their substantial fee.
And, in fairness to Larry, there are indeed cases whether spinoffs, breakup, or outright liquidation is the best thing for a company, sometimes the only thing. (That would likely have eventually turned out to have been the case with New England Wire & Cable absent Kate’s highly-improbably ‘invention’…it seems clear that Jorgy was not managing the company well in the existing circumstances…if he had been, he would have uncovered the wire-cloth opportunity himself..and was unlikely to change his ways.) But breaking up a company is a very different thing from fragmenting a company and a society. And, while Larry has had no prior involvement with NEWC, the Dems and their allies have mostly lived here all their lives and benefitted greatly from doing so.