And, we are warned by business leaders about the high costs of creating new jobs as well as their fear, uncertainty, and doubt about the economy.  Many citizens are downright worried about high government spending and high borrowing as well as astronomical deficits and skyrocketing debt.   Taxes appear to be headed upward with the upcoming repeal of the Bush tax cuts.  New health care taxes and regulations come with high price tags.  Are we really experiencing an economic recovery?  If not, when will we recover?  Let’s talk about it now.

In my view, we are in a very modest recovery phase that is most likely a part of a double-dip recession.  I also believe that if we continue down the road with the current fiscal (spending and taxing) policies and the current monetary (money supply and interest rate) policies, the American economy will slip into the second recessionary dip.

These policies are zapping the private sector of the capital and regulatory climate needed to create new businesses and new jobs.  In addition, the new health care law is driving America toward a complete restructuring of about 17% of the American economy with the depressing effect on the economy of socialized medicine.  Moreover, there are added costs associated with the new financial regulatory law and worries about potential new carbon taxes and cap-and-trade taxes and regulations.   It’s a recipe for another major recession.

When will the American economy recover?  The answer is simple.  When we cut government spending, cut taxes on economic growth (income, savings, and investment), and cut government borrowing, the economy will take off again – just as it has done in the past.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

Here’s the bottom line.  Is wealth redistribution the best way to get excellent health care?  The answer is an emphatic NO!   Here are a few reasons why the answer is NO!

1.  Big government has a bad track record of running Medicare, Medicaid, and Social Security.  There is no reason to believe ObamaCare will be run any better.  We can expect higher costs for premiums and lower quality health care.  Look at the Massachusett’s universal health care program to see how costs have skyrocketed.

2.  Shortages and rationing are inevitable.  Look to Britain and Canada to see how poorly rationing works.  Look at all the examples of people denied the tests, treatments, and drugs that are vital to save lives.

3.  Redistribution of wealth means burdenly tax-paying Americans with more taxes.  Taxes are already too high and are killing jobs now.  More taxes mean more job losses.  Expect unemployment to increase dramatically as the Bush tax cuts expire in 2011 and many, new taxes kick in.

4.  Redistribution of wealth also means economic growth will be curtailed.  The whole economy will be hurt.  Within the health care industry expect fewer innovations in drugs, medical devices, tests, and treatments.

5.  ObamaCare is not needed.  The problems with our pre-ObamaCare, health care system centered largely around an intricate and complex set of regulations, subsidies, and tax policies that hurt the system.  About 50% of all health care expenditures were controlled by government and much of the rest was indirectly controlled by government.  Government was the problem with our health care industry.  More government control will only exacerbate the problems.

The list goes on.

Remember, it might take some time in some countries.  But, socialism always leads to moral and economic bankruptcy.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

The impetus for The Wall Street Journal column was the recent Supreme Court decision that found that the “honest services fraud” law was too vague, thereby helping former Enron CEO Jeff Skilling gain a partial victory in his attempt to overturn his conviction.

Indeed, vagueness in a law is an issue.  Justice George Sutherland in 1926 even went so far as to say that a vague law “… violates the first essential of due process of law.”  The point is simple: if people can’t understand a law because it is too vague, then how can the government hold people accountable to it.  It’s a matter of justice and fairness.

In addition, vagueness is vitally important today.  Congress continues to pass large and unwieldy laws that most Americans don’t have the time or energy to read.  Even our Senators and Representatives often skip reading the laws that they are voting on.  Two examples are the health care bill and the financial reform bill.  Because parts of the bills lack specificity, we might all have to wait months or even years to see what they really mean and how they will impact America.

Economic growth is predicated on investment in new businesses, new products and services, and new jobs.  But, vagueness - in current legislation passed (such as health care) and in potential new legislation (such as financial reform, cap-and-trade, and VAT taxes) – means uncertainty.  Investors can be very reluctant to invest in a climate of vagueness and uncertainty.

Vagueness impedes economic growth.  Investors and economic growth both require a climate of reasonable rules and regulations, enforced under the rule of law, and low to moderate investment taxes.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

Back in March, I predicted in my blog that the true costs of the health care bill might be 3x or 4x higher than the current estimates.  This was based on the fact that initial Medicaid cost projections were only about 25% of their actual costs.  Well, gradually as people are diving into the new health care law and analyzing its impacts, cost projections are skyrocketing.

Virginia’s higher cost projections, now up to $1.5B, and the CBO’s higher cost projections, suggesting another $115B might be needed to cover important expenses, are both just the tip of the iceberg.  In a recent editorial, The Washington Times suggests that another factor will also add to the costs of health care.  In their view, the elimination of pre-existing condition requirements means more uninsured people will wait until they are sick to pay for health care insurance.  How much will this factor cost?

Also, according to The Heritage Foundation, the Centers for Medicare and Medicaid Services (CMS)  report that under the new health care law, costs will increase $311B.

It’s not surprising that a new government entitlement program will cost more than its original estimate.  But, this takeover of about 18% of the American Economy looks to be particularly expensive.  While some people seem to think that the health care law will cost $1 Trillion, I still believe $3 – $4 Trillion is a more realistic estimate.  Recall Cato Institute’s earlier cost estimate … more than $6 Trillion.

Regardless of how high the cost of the new health care law gets, guess who will ultimately pick up the tab?

While you can argue exactly how bleak the jobs picture is today, it is true that it’s a bad situation.  According to the Bureau of Labor Statistics, 9.7% of Americans were unemployed in March 2010.  In the more inclusive measure, the so-called U-6 metric that includes various categories of discouraged workers and part-time workers that settled for part-time work because they couldn’t find full-time employment, the rate is 16.9%.  Plus, these numbers are seasonally adjusted.  The non-seasonally adjusted numbers are worse.  They are 10.2% and 17.5% respectively.

Given the the expiration of the Bush tax cuts, the new Medicare Payroll Tax, and other new taxes proposed at the State levels, we can expect unemployment to increase.  I also believe the net/net impact of the new Health Care Law will be to increase unemployment further.  Consider, for example, the polling data on doctors who said they would consider leaving their practices if the Health Care Bill were passed.  Consider, also, the fact that the Health Care Law takes over the health care industry with incredibly burdensome regulations.  This is a de facto tax on the economy.

Economists know from many examples over decades of time, that taking money out of the private sector with taxes and spending it through various government programs, is less productive that allowing individuals and companies to invest it as they believe is best.  The private sector is simply more productive than the public sector.  The coming tax increases and possible new taxes such as a Value-Added Tax (VAT), Cap-and-Trade Taxes, Carbon Taxes, and even taxes on services such as health clubs, consultants, tax preparers, spas and a whole list of other services will only hurt unemployment further.

The government needs to stop spending wildly and stop taxing Americans so much.  Cutting taxes as I have said before will spur new investment, new businesses, new jobs, and even more revenue for the government.  One quick example.  The JFK taxes cuts in the 1960’s resulted in the LOWEST unemployment rate in 30 years.

The outlook for jobs might be very bleak today.  But, the probem can be fixed quickly with better tax policies.

Indeed, these battles over taxes are just another front in “America’s Economic War” between American Capitalism and socialism that is covered in my recently released book.

In Great Britain, the National Institute for Health and Clinical Excellence (inappropriately nicknamed NICE) is the group responsible for critical decisions about what drugs and medical treatments are permissible for patients and what ones are not.  They are the bureaucrats who makes decisions that impact not only the quality of life for some patients, but who also decide in effect who will live and who will die.  Their rationing decisions are often far from NICE.  But, their goal is rationing for the purpose of saving the government money.

To illustrate, how NICE works, let’s look at pharmaceuticals.  The Wall Street Journal lists several important drugs that were nixed by the not-so-NICE group – Vidaza, a bone marrow drug; Avastin, a multi-cancer drug; and Tyverb, a drug you might need to fight breast cancer.  With decisions like these, is it any wonder that in a recent study, breast cancer survival rates in the U.S. were about 14% higher than in Britain and prostate cancer survival rates were over 40% higher?  With more medical testing and treament options in the current U.S. health care system, Americans have better health care.

Indeed, the U.S. health care system has been operating in a highly regulated, partially free market.  It has performed well.  But, it could and would perform better if fewer regulations and more competition were allowed and if health care companies were free to innovate more and bring down costs.

Back to the breast care survival rate comparison.  If America continues on the road to de facto socialized medicine, government regulations and bureacrats will likely need to ration health care drugs, treatments, and tests.  The government will laud itself on its cost-cutting efficiency.  But, if you’re a woman, or the husband of a woman, or the son or daughter of a Mother, who does not survive breast cancer due to health care rationing by government regulations, how will you feel?

Unfortunately, if the new health care law is not ruled unconstitutional or is not repealed, it looks like Americans have health care rationing on the horizon.  To get a better understanding of our future, just look to Britain and Canada.  It’s a dismal future.  It’s not the rosy scenario painted by progressive socialists.

Constitutional Tests.  First, we can expect that the new law just passed by Congress will be signed by the President and will quickly be tested in the courts on Constitutional grounds.  It seems to me to clearly violate Article 1 Section 8 of the Constitution.  There is simply no way that the Constitution permits forcing all Americans to join a health care program.  In addition, there is no Constitutional basis for considering this forced health care mandate to be a form of taxation either.  We can also expect the States to challenges the law on a number of grounds as well.  This law simply appears to be unconstitutional.

Roe v. Wade Will Be Overturned.  This will surprise some people.  But, an effect of the health care bill passage is to invalidate Roe v. Wade, the pro-abortion decision.  Why?    Since Roe v. Wade was based in part on a ”Right to Privacy” principle and since the government is not supposed to place an “undue burden” on getting an abortion (a type of medical procedure), Congress is saying now that the government can place an “undue burden” on any other medical procedure or therapy.  If the health care bill is upheld as Constitutional, it seems to me that Roe v. Wade will be overturned easily.

Health Care Insurance Premium Costs Will Skyrocket.  That’s what they did in Massachusetts since they approved universal health care in Massachusetts in 2006.  Indeed, Massachusetts has the highest health insurance premiums in the United States.  In fact, Massachusetts health insurance premiums have gone up 30% per year!

Health Care Rationing and Shortages Are Inevitable – Health Care Quality Will Decline.  There is no free lunch in economics.  You can’t have a socialized health care system run by the government and expect the benefits of free markets.  With price controls, mandates and regulations, come increased demand on services and decreased supplies.  Innovation will be stifled too.  Incentives diminish.  It’s how economics always works.  If you need proof, just look at the shortages and rationing of health care services in Britain and Canada.

The American Economy Will Take a Big Hit.  Medicare has unfunded liabilities of $37T today.  What will this new government entitlement really cost?  Initial Medicaid cost projections were only about 25% of their actual costs.  The direct cost of the new health care bill will probably be significantly higher (maybe 3x or 4x more) than the current projections.  Plus, there are the indirect costs.  Redirecting so much money from the job-creating private sector to the ineffective government sector means the loss of more jobs.  We might even see a 1% increase in unemployment as socialized medicine is rolled out across America and the negative impacts are felt.  Overall, socialized health care will hurt our economy.

No Need for Socialized Medicine.  If America changes its mind and permits a Free Market in health care with economic freedom for consumers, patients, doctors, insurance companies, drug companies, hospitals and others, most of the current problems we face will be solved.  A Free Market in health care will mean lower health care costs, lower health care insurance premiums, more insurance products to choose from, more innovation in medical procedures, therapies, services and drugs, as well as more choices and more freedom for everyone.

Biggest Mistake in American History?  In truth, creating a government-controlled health care system (in effect, a system of socialized medicine) is probably the single biggest mistake Congress has ever made in American history.  If not overturned for being unconstitutional, Americans will probably live to regret it.  Unfortunately, for some Americans, they might not even live to regret it.  After all, how many people have died in other countries waiting for their socialized health care systems to deliver vitally needed services?

Article 1 Section 7 of the Constitition clearly states the process for a Bill to become a Law:  “Every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law, be presented to the President of the United States …”  In other words, both the House and Senate must PASS a Bill.  Some have suggested in the health care “reform” debate that it’s OK for the House to “deem” a Bill to have passed.  This appears to be clearly unconstitutional under Article 1 Section 7.

Article 1 Section 8 of the Constitution limits Congress and its abilities to create laws.  There is no reasonable way to interpret the Constitution as permitting Congress to dictate that an American join a mandatory health care program.  Also, health care “reform” can’t be considered a constitutionally-sanctioned tax either, because it does not uniformly apply to all citizens.  Once again, health care “reform” appears to be clearly unconstitutional under Article 1 Section 8.

The “Right to Privacy” Principle.  If you believe Roe v. Wade is constitutional based on its application of a “Right to Privacy” principle, certainly all the various medical procedures and therapies covered under a potential government-controlled health care system are also covered under a similar “Right to Privacy.”  After all, if the government can’t place an “undue burden” on obtaining an abortion, how can the government place an “under burden” on obtaining a virtual colonoscopy or any other medical procedure.

Indeed, it seems to me that progressive socialists are faced with a real dilemma with health care “reform” and Roe v. Wade.  If Roe v. Wade is constitutional, health care “reform” is not constitutional.  If health care “reform” could possibly (and remotely) be considered constitutional, then Roe v. Wade must be overturned … a victory for Pro-Life proponents.  Hence, health care “reform” is unconstitutional under the “Right to Privacy” principle.

Economic Freedom.  From the perspective of Economic Freedom, health care “reform” clearly limits our freedom.  Patients will have fewer choices in health care insurance policies, fewer choices in doctors and other health care providers, fewer choices in medical procedures and therapies, fewer choices in available prescriptions.  Patients will also have little or no ability to make economic decisions by “shopping” for the most cost-effective health care products and services.

Doctors will have fewer choices in treatment options and pricing models for their patients.  Health insurance companies will have fewer choices in the policies and benefits they can offer as well as the pricing models they can employ to meet consumer needs.  With $500B in cuts to Medicare, seniors will have fewer health care choices too.  All Americans can expect less Economic Freedom, health care shortages, and rationing of health care products and services.

To summarize, the so-called health care “reform” currently being debated across America is likely to be found unconstitutional.  It also will likely and substantially reduce each American’s Economic Freedom.

In Part 1, the 14 Key Points against government-controlled health care are listed.  In Parts 2, 3 and 4, reasons for each point are given.

It’s Not Constitutional – Article 1 Section 8.  A clear case can be made that health care “reform” is unconstitutional.  For starters, Article 1 Section 8 limits Congress and its abilities to create laws.  There is no reasonable way to interpret the Constitution as permitting Congress to dictate that an American join a mandatory health care program.  Also, health care “reform” can’t be considered a constitutionally-sanctioned tax either because it does not uniformly apply to all citizens.

It’s Not Constitutional – Roe v. Wade.  If you believe Roe v. Wade is constitutional based on its application of a “Right to Privacy” principle, certainly all the various medical procedures and therapies covered under a potential government-controlled health care system are also covered under a similar “Right to Privacy.”  Hence, health care “reform” is unconstitutional.  After all, if the government can’t place an “undue burden” on obtaining an abortion, how can the government place an “under burden” on obtaining a virtual colonoscopy or any other medical procedure.  Indeed, it seems to me that progressive socialists are faced with a real dilemma with health care “reform” and Roe v. Wade.  If Roe v. Wade is constitutional, health care “reform” is not constitutional.  If health care “reform” could possibly (and remotely) be considered constitutional, then Roe v. Wade must be overturned … a victory for Pro-Life proponents.

It’s Not Fiscally Sound.  This is an economic no brainer.  Medicare’s unfunded liability is about $38T and Medicaid’s costs are growing at 21% per year.  So, why would adding more costs to government-controlled health care result in fiscal solvency?  Besides, how can any program that requires 10 years of revenues to cover six years of costs be considered fiscally sound?

It’s Not Necessary because there are much Better, Free Market Solutions Available.  There are many short terms fixes that can be applied that will help enormously.  Consider, the obvious – Reasonable caps on medical liability awards, allow insurance companies to compete across state lines, allow insurance companies the freedom to develop different policies for different groups of consumers, give Medicare patients vouchers to purchase private insurance, etc.  Long term – Deregulate and privatize the health care industry.  Have a Medicaid-like “safety net” for the truly poor and needy.

It’s Not Wanted by the Majority of Americans in Poll after Poll.  In poll after poll, Americans are overwhelmingly rejecting health care “reform.”  Americans don’t want health care “reform” as currently discussed.  Shouldn’t this debate be over now?

In Part 1, the 14 Key Points against government-controlled health care are listed.  In Parts 2, 3 and 4, reasons for each point are given.

It Means Some Health Insurance Companies Will Go Out of Business.  Under health care “reform,” the government will control both health care costs and benefits.  That’s an impossible environment for a business to operate within.  Business decision-making is severely limited under the control of government.  Take Massachusetts and its universal health care program.  The Medical Loss Ratio is 112%.  This means for every $100 in premiums, the health insurance companies pay out $112 in benefits.  How long can a company stay in business under those circumstances?  How long can they tolerate such losses?

It Means Many Good Doctors and Practices Will Close Down.  Good doctors are already leaving health care because they are being paid too little under Medicare rules.  More doctors will leave under health care “reform” because it just doesn’t pay.  In economics, we know that price controls lead to shortages and rationing.  We can expect a shortage of well-qualified doctors under government-controlled health care “reform.”

It Means Lower Health Care Quality.  Why? To start with, there will be fewer well-qualified doctors.  Also, there will be fewer market incentives for innovation in medical products and services and delivery options.  There will be less incentive to invest in new drugs and therapies.  As with current government regulations and mandates, there will also be more bureaucratic emphasis placed on quantity over quality.  Plus, cost-cutting decisions will eliminate newer technologies and more expensive (and higher quality) procedures from being available to all Americans.  The Wall Street Journal recently reported that President Obama’s virtual colonoscopy procedure, an approach that has advantages over traditional colonoscopy, was rejected for Medicare patients.  Will health care “reform” also mean a two-tiered health care system with better health care only for government officials?  Finally, how can about $500B in Medicare cuts improve health care for our seniors? 

It Means Fewer Innovations in Health Care Products, Services and Pricing Models as well as Health Insurance Products.  When the government controls an industry, all the advantages of a Free Market are damaged or completely lost.  With economic freedom (as opposed to government regulations and mandates), come lower prices, more competition, more innovation, and higher quality. 

It Means Fewer Health Care Choices for Patients.  Yes, with health care “reform” we can expect fewer doctors to choose from; fewer medical procedures will be available to choose from (or quite possibly, medical procedures which will be dictated by government-bureaucrats primarily concerned with holding costs down); fewer health insurance options; and eventually, a single-payer, socialized health care system.

It Means Health Care Rationing by Government Bureaucrats.  Government-controlled programs often lead to shortages and rationing.  Examples abound all over the world.  Look at the dire health care shortages and rationing of health care in Canada and Great Britain.  The more complete the government control, the greater the likelihood of shortages and rationing.  If you eliminate economic freedom and substitute government control, you inevitably have shortages and rationing in any industry.