Catastrophe Cometh

On May 12th, the New York Times published a story regarding the effects in the recession on the state of Social Security and Medicare. Significant deterioration of the financial health of these entitlement programs has raised questions as to their future viability and the need for reform. The NYT provided the following disturbing graphic which illustrates exactly how dire the situation has become:
As you can clearly see the future of Medicare and Social Security is very bleak. The Treasury's 2009 projections indicate that Medicare only has only 1.5 little rectangles remaining, while SS has experienced a 20% year-over-year little rectangle reduction. Compounding matters, the little rectangles are turning black, which is a classic economic indicator of doom DOOM. The administration has proposed that health care cost cutting measures are the solution for Medicare:
The Treasury secretary, Timothy F. Geithner, said the only way to keep Medicare solvent was to “control runaway growth in both public and private health care expenditures.” And he said Mr. Obama intended to do that as part of his plan to guarantee access to health insurance for all Americans. But if cost controls do not produce the expected savings, Congress is likely to find it difficult to preserve benefits without increasing taxes.
Using Austrian Polygonal Differential Analysis common sense on the following historical health care industry campaign contribution charts from OpenSecrets.org , the probability of future health care cost reductions fall somewhere in the range of notahopeinhell and 0.
In reality, the health care and insurance industries are taking a page from the TARP playbook, where
the specter of crisis.is being used to justify corrupt legislation. The health care lobby graciously agreed to reduce cost growth (not level, but rate of change) by 1.5%, yielding a projected savings of $2T over the next ten years. In exchange for this triviality, the insurance industry will receive a massive subsidy in the form of artificial demand creation; legally mandated health insurance for all US citizens in 2013.

This was the masterstroke of Senate Finance Committee's chairman, Max Baucus. Chairman Baucus spent long hours at the Roundtable to Discuss Reforming America’s Health Care Delivery System "hammering out" out the particulars with representatives from Blue Cross, Aetna, and the Business Roundtable. And when I say "hammering out," what I mean is selling legislation and the public interest for campaign contributions:
Lifetime contributions to Sen. Max Baucus via Opencecrets.org.


  1. If we maintain these government-sponsored 'entitlements,' then it's destination Poor House.

  2. Agreed, so long as nothing is done about the outrageous waste and expense that occurs in US medicine.

  3. The solution is no gov't support. People would have to make individual economic decisions on medical services to buy. And enterprises would be motivated to innovate in response to consumer-led buying dynamic. Entire system would change.

  4. I've never been a fan of laissez-faire because I couldn't see how it wouldn't lead to the monopolization of industries with high barriers to entry. However, our current state of having the gov't owned by business, makes laissez-faire sound kind of nice.

  5. A counter intuitive consequence of regulation is that it tends to RAISE barriers to entry and protect incumbents.

    For example, there's strong evidence to believe this drove the formation of the Federal Reserve a century ago. Big bankers saw their businesses being slowly wittled away by innovative entrants, and they saw regulation and oversight as a means to protect their franchises.

    Monopolies rarely, if ever, persist in free markets due to 'creative destruction.' Persistent monopolies nearly always require government support.

    My sense is that if more folks understood this linkage, then we'd be slower to regulate.