2013 August 11

     8% for Obamacare

     One might wonder where I get my eight percent (8% = 0.08) number for the cost of Obamacare. It's a reasonable question and I'm sure 8% isn't the only answer, or the only good guess. It's my educated guess and here's my reasoning.

     We know all the other socialized-medicine countries have found themselves getting less care for more money after they socialized their health care. (Remember that the other socialized-medicine countries had their health-care blow softened by having their really-sick people come to the United States for care, not an option open to the United States.) Whatever government inefficiency exists in all the other things government does, social programs, paving roads, et cetera, doesn't seem to spare doctors and hospitals. That Obamacare involves having the IRS do anything only makes me think it will be less efficient than other government programs, about 50% of private companies. Let's give it the benefit of the doubt and figure they can do the same thing as our current, sort-of-private health care at twice the price.

     Our country could end up buying the same health care, but for 32% instead of 16% of our gross national product (GNP). I doubt that Americans will give up 16/84 (19%) of what they have left to keep the same standard of care. I similarly doubt that Americans will settle for half what we get now for the same expenditure. They'll do something in between, and I figure it won't be too far from splitting the difference, 3/4 of what we have now for 3/2 the price. That means the lower standard of health care will cost America eight percent (8%) more of its GNP that what we're spending now. Since we're not going to produce any more wealth than now, and I doubt foreign suppliers are going to let us get away with giving them more not-able-to-spend-stateside dollars than now, that means we'll have to give up 8% of our GNP somewhere else.

     This is not meant to be a discussion in any way of the constitutionality or legality of government health care in the United States, only what it would cost if it were legal.

     25% before Obamacare

     So where does that leave America compared to 2006? The government response to the Internet bubble in 2001 was passive, waiting for it to go away, so it blew over in about 18 months. Alas, the similar-size housing bubble got plenty of federal attention in the form of bailouts, stimulus packages, and other groteque expansion of government. An already-bloated government that was about 1/3 of our economy has grown to 1/2 of our economy. That means our private sector has shrunk from 2/3 to 1/2 of our remaining economy, a 25% hit in productivity.

     In the short term, we have not felt anywhere near the full effect of this because foreign countries, especially Saudi Arabia and China, are taking our dollars in exchange for oil and consumer goods. They can't spend those dollars on much because we don't make anything they really want to buy, but they haven't realized this yet. Japan never figured it out and the $2 trillion in goods they sent over twenty years eventually ran their economy down. I'm told China spends their dollars in the middle east for oil. If the sheiks and sultans ever figure out that all those dollars aren't doing them any good, then the shit will hit the fan stateside and our ability to import just about anything will virtually disappear. Until then, we're not going to see all of our shrinking productivity, except in our rapidly dwindling job market in manufacturing, the tragic loss of factory jobs.

     So take the 25% loss in the private-productive sector and add the 8% extra Obamacare will cost, and we have a country that is 1/3 poorer in ability to produce than it was in 2006. I didn't think things were so good then, but now we're soggy with nostalgia for those good old days.

     None of this calculation-estimation includes the extra cost of wave after wave of new regulation and restriction that started in 2007 and increased dramatically in 2009.

     It is amazing that the world's most powerful economy, still powerful in 2006 after fifty years of slow, sad decline, could be pretty-well destroyed in just six years occupied by greed and horribly-bad economic policy.

     20 Million Lost Jobs

     Anecdote and economic science seem to agree on this one. Things are awful in the U.S. economy.

     Not everybody feels that way. I have a liberal buddy in Washington who works for one of the many regulatory agencies in the District of Columbia. He tells me things are just fine in his neighborhood with rising employment and burgeoning stock portfolios. Things are great in D.C., but the rest of the country is hurting badly. His stock is doing nicely if you don't count that those dollars used to buy half a gallon of unleaded gasoline and now they don't buy even one third of a gallon. Yes, things really suck stateside.

     As I said, I believe 1/4 of the productive employment is gone, so why aren't 1/4 of the 152 million U.S. jobs gone? The answer is that an economy adapts. Immigrants at all levels of the technical-ability spectrum are finding American jobs hard or impossible to get. Personal anecdote, a Chinese Ph.D. friend of mine and his wife felt good about their prospects around 2004 when they came here, but had to go back to China around 2010 for job opportunities. Second, Americans are moving "down the food chain" in jobs. Highly-skilled people are taking less skilled jobs while medium-skill people are taking unskilled jobs. The people not working at the end of the story are those who used to make a marginal living around minimum wage and are now living on what they can get from the government dole. Employers are finding more people willing to work cheaply.

     Again, I'll use my split-the-difference estimate that 1/4 of 152 million jobs going away at 2006 pay scales could have 152 million jobs at 3/4 pay, but I don't think that will happen. It also could mean 38 million fewer jobs at the same pay, but I don't think that will happen either. Instead I think the productive economy will absorb about half the shock each way and we'll find 20 million fewer jobs at 7/8 pay, about what my personal experience with friends tells me.


     Is it Bush's fault? Maybe it's Eisenhower, or even Coolidge. It really doesn't matter. Whoever was pulling American's political-economic strings starting in 2007 made a mess. Economies don't have such long memories, maybe a year or two. You could blame Clinton for his policy of houses for everybody, never mind there are more Americans than houses, but there was ample opportunity to correct that since then. I believe both factions of the democratic-republicans are to blame and maybe the libertarians can fix it. I believe the democrats have made absolute pigs of themselves and deserve the lion's share of the responsibility for our mess, but anybody who supported government bailouts, handouts, and other gratuitous programs is to blame.

     So we're going the wrong way and our left wing is pressing us to continue on our wayward path. If we fix it, then we have a long road to recovery. If not, then things will continue to decline.



If you want more of this kind of material then here are my American-issues essays.

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