v'ܩ Unintended Consequences Congress Never Saw Coming - Part 2
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Unintended Consequences Congress Never Saw Coming - Part 2

April 22nd, 2009

There are good and bad consequences from everything that Congress tries to do. Some of them they don’t see coming. In part 1 of the unintended consequences series, I discussed the housing crisis, ethanol subsidies, and tax credits for other alternative fuels. These are just a few of the things that Congress has gotten horribly wrong in the last few years from messing with the free market.

In this part I am going to cover 2 things that Congress is currently considering that are going to have unintended consequences. They think that the benefits will outweigh these consequences, then again that’s what they thought about the Community Reinvestment Act and the alternative fuel tax credits too.

Universal Health Care

I really don’t understand the thought behind universal health care. It has been tried on smaller scales and failed miserably already. Look at what happened in Hawaii.

Hawaii is dropping the only state universal child health care program in the country just seven months after it launched.
Gov. Linda Lingle’s administration cited budget shortfalls and other available health care options for eliminating funding for the program. A state official said families were dropping private coverage so their children would be eligible for the subsidized plan.
“People who were already able to afford health care began to stop paying for it so they could get it for free,” said Dr. Kenny Fink, the administrator for Med-QUEST at the Department of Human Services. “I don’t believe that was the intent of the program.”

They were only trying to cover children. It went bankrupt in 7 months. People are lazy and greedy. That is a fact of life that we have to deal with. If there is a way for people to get something for nothing, they will try to do it. Consider the 9 patients that went to an ER almost 2700 times in 6 years. One of our readers, Jeffery, said this:

As a former ER employee I can say that this is not uncommon. You’ll have a handful to come in once a week, twice that amount will show up everyother week, and even more show up monthly. All with the red credit card, medicaid.

Just imagine for a moment what will happen if the government tries to get into the health care business along with the banking and automobile businesses. They will fail, and they will fail so miserably we will all be paying for it for a long, long time.

Cap and Trade

Cap and trade is another thing on the books destined to have some terrible repercussions. Heritage defines cap and trade like this:

These measures would set a limit, or cap, on carbon dioxide emissions from fossil fuel use. The effect of such a cap would be to impose rationing of coal, oil, and natural gas on the American economy. Each covered utility, oil company, and manufacturing facility would be given allowances based on past emissions or some other formula. Those companies that emit less carbon dioxide than permitted by their allowances could sell the excess to those that do not; this is the trade part of cap and trade. Over time, the cap would be ratcheted down, requiring greater cuts in emissions.

The economic nightmare that cap and trade creates will be worse than any potential environmental benefits it has. Anne Smith says that the cost to consumers would be between $800 and $1300 a year due to the increase in the price of energy. Remember when Obama said he wouldn’t raise taxes on 95% of Americans? This is a tax that everyone in America will have to pay.

This will raise the price of energy by making utilities lower their carbon dioxide emissions. However, in the long term this is probably going to be worse for the environment. The reason? Companies will be spending a lot of money on quick fixes to get under the cap for the near term. Real change would take longer. By requiring companies to spend money and meet very short sighted goals, you reduce their ability to spend money on long term innovations that would provide greater benefits.

Remember that $800 to $1300 that everyone is going to lose to higher energy costs? That is going to cost jobs. Lots of them. It is going to cost America jobs for 2 reasons. First, that is money that could be spent elsewhere. Money that could be spent on entertainment and at retail. That is a lot of lost revenue for American companies and it will cost jobs. Second, this will significantly raise the cost of manufacturing. That means even more jobs will be lost overseas. Anne Smith estimates the loss between 1.2 and 2.3 million jobs. Does anyone else think this sounds like a terrible idea in the middle of a recession?

Congress might be trying to help. More likely they are just trying to please a certain set of constituents that they want to vote for them next election cycle. I for one am sick of them trying to mess with things that they don’t fully understand and can’t possibly succeed at. Stay out of banking. Stay out of the auto industry. Don’t mess with health care. Please, just spend some money on defense, build a few roads and bridges, and then leave us alone.

Author: Derek Clark Categories: Finance, General Politics, Health Care Tags:
  1. Jeffrey
    April 23rd, 2009 at 11:28 | #1

    Thanks for the quote Derek, but it gets even worse when it comes to Universal Healthcare. Let’s look at the quality of medicine in its current state. Real quality, not the quality spouted on the nightly news. You know, healthcare is expensive and unaccessable for the poor. These problems have been created by lawyers and a government who supports lawyers, not the medical community. The financial problems of healthcare are directly related to the extra costs that these two groups have applied to the practice of medicine. Anyways, back to the real quality. The real judgement on quality comes from two criteria, capabilities and consistency. Capabilty- no one in the world is more capapibly than the USA. We are still the only country to perform a simultaneous heart and lung transplant. The question now is why are we more capaible than anywhere else? The answer is competition. There is a huge network of researchers and doctors pushing for the next big development. Consistency- the training Doctors recieve in the US is the toughest and most modern in the world. Thus, they possess a skill that is highly marketable, and are compensated for it. Also, medicine’s own regulations are also the strictest in the world.
    OK, now what is the effect of Universal Healthcare (more lawyers and government)on these two functions of quality?
    Capabilties - The implementation of socialed medicine takes away the incentive for research. How so? Research in these complex biochemical environments is extremely expensive (hunderds of billions as an industry). If the government caps what they are willing to pay for healthcare it limits competition between hospitals, they will no longer be pushing to implement the most advanced technologies so they can limit expenses. If hospitals are not using new technologies, research will not be able to fund itself. Doctors are already in shortage. To make up for the defecite, specialists (Surgeons, Radiologist, etc) work exceptionally long hours (IE 80+ hours a week). If their salaries are capped (which they would be), they lose the incentive to work over 40 hours a week. If they doctors aren’t working, they system is not capable. Because of these short-falls, the back log of patients needing services would be mind-boggling. Example, a wait time in Canada for a patient needing a by-pass heart surgery was quoted to be up to 14 months. Of course they would be dead by then, but there wasn’t a thorasic surgeon available. Consistency- In order to lessen wait times, the government would be forced to educate more doctors. Easy, right? Then why aren’t there more now? Medicine is an extremely difficult path. Think about the most difficult subject matter you can study and having to give up the best years of your life (12+ years) to study it under difficult circumstances. All the while going at least a quart million in debt. That’s what it takes. Very few can do so. So, in order to fix the problem, the qualifications would have to be lowered. And in turn, the consistencies of medicine would decline. Thanks for the great article Derek, I could go on all day! Can’t wait until the next one.

  2. Jeffrey
    April 23rd, 2009 at 12:17 | #2

    PS. Sorry for the many spelling and grammer errors, along with the patchwork of thoughts. I hope the central theme was conveyed.

  3. April 23rd, 2009 at 13:33 | #3

    I completely agree. There are so many problems with socialized health care I could go forever as well. I really just don’t understand how people can research this for more than 5 minutes and still think it is a good idea.

  4. Jeffrey
    April 23rd, 2009 at 14:34 | #4

    Its a power play for votes. Nothing more than pandering. When its doesn’t work, they will blame free-market capitolists for obstructing its success.