Most Recent Stories

Why Does the Power of the Hard Money/Fiscal Austerity Orthodoxy Persist?

Doc K asks an important question on his blog this weekend – how, after all of these years of being dreadfully wrong, do the Austerians and inflationistas still garner so much attention?  I think it’s simple:

  1. The idea that inflation is always bad is very simple to digest (even though it’s wrong).
  2. The idea that the government is always bad is very simple to digest (even though it’s wrong).

Of course, the economists and pundits who have been touting these views for the last half decade have been largely discredited.   But politicians and the people who really matter don’t cater to economists.  They cater to the general public.  And the general public doesn’t waste their time thinking about nerdy things like the operational realities of the monetary system.

In addition, a huge portion of the US population still thinks the government can’t do anything better than the “free market”.   After all, this is a country built largely on the rejection of “big government”.

Combine those two perspectives together and you get an environment that is perfect for embracing the simple message that the hard money crowd promotes.


  1. connie hawkins

    what exactly is it that big government does well, aside from bomb other countries in oblivion and throw entire countries in chaos? is medicare, obamacare, or the veterans admin a good program? how about social security, welfare, the post office, immigration control, etc, etc? i doubt 50% of the government workforce is even productive. and what has all this big government deficit spending gotten us economically? huge debt, one of the worst economic recoveries in history, and an economy that goes from one asset bubble to the next.

  2. Cullen Roche

    It’s a little extreme to imply that everything the government does it bad, no? For instance, you took the entire US military and painted it as a bomb dropping mission. But the US military is actually a substantial humanitarian entity, one of the most important developers of technologies in the economy, disaster response, etc. Or consider the police, the firemen, etc. Are all of these people really just a big waste? I would most certainly argue no.

    Is our govt too large? I think that’s certainly a reasonable argument. But I also think we have to consider the context. We can increase government spending without necessarily increasing the size of the government workforce, for instance. In fact, that’s precisely what’s happened in the last 5 years. Obama has presided over an unprecedented cut in govt employment. The main reason the debt increased was because of the crisis and the collapse in tax receipts. So revenues fell and expenses rose as more people filed for govt aid.
    Anyhow, I am not implying that “big govt” is necessarily good. But I think we have to be careful generalizing.

  3. Cullen Roche

    Who has been a bigger beneficiary of govt actions in the last 5 years than the wealthy? QE boosted stock prices, the deficit bolstered corporate profits, etc. I don’t think I agree with Steve that soft money policies don’t benefit the wealthy. I think they benefit the wealthy to a tremendous extent. I just don’t think wealthy people fully realize how much of their wealth has been the result of the govt and not some “free market” force so they tend to support anti govt programs despite this reality….

  4. Pete Bondurant


    Regarding point 2, I think than more than being easy to digest, it is mostly an idea that is vastly promoted in any possible mainstream media and by any associated specialists. It might sound a detail but it is in my opinion a key element. It is part of a “dogma” that benefit to certain segment of economic agents who benefit from privatisation (and tend to own/fund media/congressmen campaigns etc). Then, from a “Joe the plumber perspective” (long work day, mortgage, kids etc), it is easier to repeat what the priests have said than going through all the theories (..priests went through all those big books and have all those diploma !).

    So, more than “a huge portion of the US population still THINKS the government can’t do anything better than the “free market””, one should rather say, “a huge portion of the US population IS BEING EXPOSED THOUSANDS OF TIME A YEAR TO MEDIA AND “ECONOMISTS” EXPLAINING THAT the government can’t do anything better than the “free market”.”.

    PS: I admit there is an argument around “big” organisation being inefficient. In that sense one could question govt. Still i doubt that Koch brothers would refuse to set a big fat company having monopoly on some privatized sectors just because it would be inefficient ! In that sense i tend to reject those technicals arguments around govt as they are used in a cunning way to instillate doubt but when it comes to generalising, intellectual honesty suddenly disappears…and i value intellectual honesty a lot (that’s why i regularly read prag cap since 2010 !!!)

  5. Willy1964

    Both C. Roche & Krugman overlook the fact that government deficits don’t matter until they do matter.

    That mounting government debt in combination with rising interest rates was precisely the reason why Volcker was FORCED to hike rates in 1981. In the late 1970s foreigners refrained from buying T-bonds forcing rates higher. Combined with a weakening USD, it yielded the erroneous perception was that inflation was going through the roof (rising rates & inflation).

    No, Volcker didn’t “loosen up” in 1982. it was “Mr. Market” that made rates fall after 1981. And the FED was forced to follow what “Mr. Market” dictates.

    I agree with C. Roche that not all government spending is bad and not all business spending is good. Though I would think A LOT OF government spending is utterly wasteful.

  6. Cullen Roche

    I have never and would never say government deficits don’t matter. That’s the type of generalization that is epitomized by the inflationista and austerian thinkers….the type of generalization I am saying is dangerous….

  7. Mary

    1. Most libertarian-leaning (Adam Smith fans) understand that law and order are a pre-requisite to private market operation- thus you need uniformed public servants; i.e. the enumerated/legitimate govt. functions. 1.a. as a “financial operation”, however, the armed forces are not efficient- the $900 hammer problem due to inefficient market incentives in the institution’s administration/procurement- very much predicted by the theory of micro-economics
    2. Objection to government is when it takes payment and provides a product or service that private entities could do- over long periods, the government becomes a relative loser.
    3. We could be like France, >50% govt economy. It’s pretty clear that is not a winning proposition. Why even do anything that takes the political economy more in the direction of France? I wouldn’t advise it.
    4. Those of us who have studied it realize that the problem with govt growth for about 20-30 years has been at the state and local levels
    5. The federal government has very little discretionary budget- it is mostly an entitlement income money transfer operation

  8. John Daschbach

    On the first point I think the use of money as a microeconomic store of value is one reason that many people fear inflation. A second reason is that changes in the rate of inflation always impact the real return on fixed cash flows. People who saved money in bond like instruments for retirement in the 50’s to 82 got hurt by the rising rate of inflation. Of course people who saved in the same way in the 80’s and 90’s enjoyed real returns which unsustainable.

    On the second point I think there is an inherent human trait that people like to think they can do things better than someone else (the basis for competition) and especially when one can distinguish between tribes (here the tribes being the private sector and the government sector).

    However, on the second point, I think the Kalecki argument is as clear as it gets. Having the government directly engage in the economy with good results is a threat to power of what Kalecki called Capitalists. As a result we have constructed a public-private system in which almost all the benefits of public spending accrue to the private sector. From our history with railroads, to Eisenhower’s worry about the military-industrial complex, to NIH funded research, we have a system in which often a few Capitalists make excess profits at public expense. Again, Kalecki understood this well.

  9. willid3

    well so far Medicare does better than any other ‘insurance’ company paying for health care, bar none, in the US. they have lower expenses than any of the private companies. and what exactly did we get from the free market? other than almost no customer service? or really expensive health care (at the very top world wide), delivered badly as a rule, and with the worst results based on life span in the US. course the VA comes up. but if any other health care provider had their customer base better than quadrupled and didnt increase spending on providing that care? oh wait most private providers do that . and fail just about as miserably too if not worse.
    course it depends on how you quantify as productive. are they doing what we pay them too? probably. doing at least as well as your cable company? better more likely

  10. theta1

    He is not saying that soft money policies don’t benefit the wealthy, he is saying that they are more likely to change the status quo, the distribution of wealth, therefore it is not in their interest to allow this to happen. If you are ahead in the game, you don’t want to keep playing, you prefer to play defensively, slow things down, etc., even though playing at the same pace can put you further ahead. Why risk it? It’s a fair point.

  11. Cullen Roche

    The pursuit of wealth is generally defined by how much someone can change the status quo. If the wealthy wanted to maintain the status quo then there’d be no process by which they even acquire their wealth. Look at the Forbes 400 list. That list is some of the most progressive people in the world. They are constantly evolving and pushing for big changes. They aren’t just sitting around counting their dollars. That’s not how most rich people operate.

    I think there’s some generalizing in there about how wealthy people think that doesn’t accurately reflect reality. Wealthy people don’t just sit around counting their money. Most of them are super type A who can’t sit still for 10 minutes. I think it’s convenient to peg them as being against the status quo because it makes a liberal agenda look more appealing in the eyes of some, but that’s a dangerous generalization.

  12. Joe Franzone

    Regarding point 1, the $900 hammer problem is a myth. First of all it was a $435 hammer, and then a $600 hammer, but I guess inflation and all $900 sounds about right. What really happened, and happens is a matter of government accounting, The military bought the hammer and bundled into one bulk purchase of many different spare parts. When defense contractors allocated their engineering expenses among the individual spare parts on the list, a bookkeeping exercise that had no effect on the price the Pentagon paid overall, they simply treated every item the same. So the hammer, originally $15, picked up the same amount of research and development overhead, $420, as each of the more expensive and highly technical components. But alas, that headline and story doesn’t sell newspapers (or attracts clicks)

  13. Steve Schuller

    From personal experience, I’d say both Medicare and Social Security do better than equivalent private companies. (ie: medical insurance companies and investment/annuity providers).
    Way better.

  14. Willy1964

    – Well, then you have changed your mind when you ditched MMT and adopted MR.
    – I still see Krugman’s article as an endorsement for more QE & government stimulus. But it seems Krugman still doesn’t get it that it doesn’t work in the current financial environment. He should look at the work of Steve Keen.
    – Krugman is right that the Austrians & Inflationistas have a number of blind spots but he also fails to see his own blind spots.

  15. topor7373

    Cullen, interesting idea about US military and its humanitarian mission. I guess the red cross needs to beef up its ballistic missile arsenal to be more effective in pinpoint aid delivery. It’s amazing how people would understand details about complexities of the banking system but would not want to analyze basic military expenditure facts.

    FYI: https://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures

    Just a summary: US accounts for 36% of the world military spending. One efficient peace keeping operation.

  16. Cullen Roche

    My point was simply to highlight the fact that the US military isn’t just a bomb dropping entity. I think you know that and still allow political generalizations to creep into the discussion….

  17. Cullen Roche

    Nope. I have never said deficits don’t matter. I have always said that govt spending could be extremely harmful in the wrong environment. ALWAYS.

    I am a fiscal conservative. I’m not one of these people who thinks we should just ramp up the govt’s spending efforts and go dig holes all over the place….

  18. topor7373

    I think it is mostly a tool of geopolitical power and is used that way. The size of the expenditure says that. I guess it reflects my politics but the numbers support it. I cannot call US a welfare state compared to EU, because the numbers do not support it. If a mobster donates to a church it does not make him a charity organization. Again, I am not calling the federal goverment mobsters I am just following the numbers

  19. Cullen Roche

    Sure, the military is “mostly” a tool of geopolitical power. But a lot of good actually comes out of the military as well. The number of inventions that have come out of the US military and its various branches are staggering. Whether it was certain types of engines, propulsion systems, satellite systems, communication devices (like the one we’re using), digital photopgraphy, nuclear technology, power systems, GPS, etc.

    This isn’t just an entity that builds bombs and kills people. The US military has literally changed the way we all live through its incredible innovations.

  20. Geoff

    The better question is which matters most, govt spending or govt deficits. They are very different.

  21. connie hawkins

    lol,you have be kidding. both programs are going broke. fewer doctors are accepting medicare patients, and ss has a history of raising taxes and reducing benefits just to stay afloat.

  22. connie hawkins

    umm, medicare is going broke. fewer and fewer doctors are accepting it all the time.

  23. Suvy

    The amount of debt and the deficit always matter because debt involves a transfer of real resources. If the transfer isn’t productive enough to cover the real cost of the transfer, it will drag on growth. Cullen’s been very consistent about this.

  24. John Daschbach

    Connie presents the ultimate problem with economic discussions, the IQ discriminator, or the IQ death spiral. At the IQ 85 level medicare isn’t going broke, and in fact it can’t go broke. Only someone with a functional IQ lower than this can make this argument. But in the US, instead of providing government help for those mentally unable to understand simple things at a level that is required for a functioning democracy we have a system where people are able to take advantage of the limited IQ of many people for power and profit.

    The government side of Medicare is incredibly efficient and well run. The private side, and the distortions of the US system for public-private systems, make health care in the US the most inefficient in the world, by about a factor of 2x over the rest of the OECD countries. In the private market view, if health care was anything approaching an efficient market, the US private market system would be quickly eliminated through bankruptcy.

    Unfortunately we allow people like Connie to participate in governing by allowing them to vote, even though they couldn’t pass 8th grade.

  25. Suvy

    Is the personal attack on Connie necessary? Chill with that shit.

    With regards to Medicare, the problem is with our healthcare system as it’s designed by the insurance/big pharma companies for the insurance/big pharma companies. Insurance only makes sense for extreme emergencies. Let me put it this way: does car insurance pay for your oil change? Of course not. Does health insurance pay for basic prescriptions you need on a daily basis?

    This begs us to the question: why don’t we import drugs from other places? The exact same prescription drugs are orders of magnitude cheaper in other places. Why don’t we encourage more people to go overseas for the same surgeries here? Rather than paying $100,000 for a surgery here in the US, why don’t people go to another country and pay $3500 for the flight ticket and surgery (don’t tell me it’s not practical or realistic because I know LOTS of people who do this)? Nothing in our health care system makes any sense. It’s not a private vs public thing; it’s an issue of insurance not playing its role and the ACA does nothing to fix this.

    Also remember that the structure of the US is different from other European countries as the size and scale of this country can’t be matched with any other parts of the developed world. Comparing the US to Germany or France or the UK or even Canada and saying we should have the same health care system as those countries doesn’t make any sense because all of those countries have populations that are much smaller than the US and much more homogenized than the US. Should Texas have the same health care system as New York or Massachusetts? They don’t even have the same diversity or demography in population, so how can you say they need to have the same health care system? How does that even make any sense?

    What’s your response gonna be, John? Are you gonna go and personally attack me too? Go for it.

  26. Suvy


    The US military is the most rogue military program on the planet. We armed the Syrian rebels and the weapons ended up going to ISIS. I’m also pretty sure the CIA trained some of the ISIS fighters as well. We’re allying with fundamentalist regimes like Saudi Arabia and Qatar who’re funding groups like ISIS (this is what the European Commission says, I’m not making this up). You’ve got some guy sitting in some office who can bomb some place in Pakistan and if he hits some kid’s house, the guy who dropped the bomb from a drone suffers no negative consequences. Then, the kids growing up nearby see the shrapnel of the bomb with an American flag and we wonder why they turn to radical movements. You don’t wipe out terrorism by killing terrorists.

  27. Suvy

    I actually agree with this, but that being said, a large part of what the US military does is morally wrong.

  28. connie hawkins

    your comment is so retarded its not really even worthy of a response. medicare is another inefficient, one size fits all, solution from washington. everyone knows the unfunded liabilities faced by medicare are staggering, especially with the baby boomers retiring. the only way medicare even stays afloat is through price controls, and as a result doctors will only accept a limited number of medicare patients. and just like any government program, it reeks with fraud and abuse.

  29. Suvy

    The problem with the military is our foreign policy. I don’t have a problem with the military infrastructure or the technology, but there’s no reason to run the kind of war machine we’re running.

    By the way, less than 15% of our military spending goes to R&D. Most of it goes to operations and maintenance, procurement, and military personnel (>75%). We’ve got bases stationed in almost every country. Is this really necessary? Why do we have bases and defend rich countries who’re capable of defending themselves? Why are we giving foreign aid to scumbag governments and providing arms to groups of Syrian rebels who turn on us? Why did the CIA train members of organizations like ISIS? There’s plenty of room for us to cut our military budget.

  30. $1003569

    Austerians-hard money types hate/fear government, and they hate/fear debt. Nothing you can say will dissuade them from these feelings, they are probably even genetic. All of their other beliefs emerge from those feelings. No matter how much evidence you give them that they are wrong, and no matter how long and how often their predictions turn out wrong, their views cannot be changed. Their fear/hatred of government and debt is so deeply ingrained in their psyche they could lose all their money on investments based on these fears and it still won’t change their mind. They will simply devise the excuse, “I’m early.”

  31. willid3

    doctor’s not accepting has nothing to do with going broke. its not going broke. its doing exactly what all health insurance companies do, reduce what they pay doctors. does that mean that all health insurance companies are going broke too? if not, why not? they are doing the exact same thing. and in some cases doctors are not accepting them either. for the same basic reason

  32. willid3

    well if health insurance only covered extreme ’emergencies’ then we wouldnt take care of the minor problems that over time become major ones. so we would end up with lots of major ones. thats probably part of the reason that health insurance covers that cause in the long wrong it costs less. and we can see how the car business reacted to the lack of maintenance by making cars need it less, otherwise they ended up with black eyes from the perception that their cars were unreliable. but last i checked, we dont have the option to improve the human in the same way. but as the old saw goes, you can pay me now (less, those oil changes etc) or you can pay me later (lots more, up engine to replacements).
    but our health care system wasnt really built for much more than to encourage providers to prescribe more health care (since thats what gets them paid more), so they do. we dont pay for better health care. cause we aren’t paying for results. the better method would be to pay for results not the procedures. we could do that, but then how do we 1) encourage patients to do the ‘normal’ care (to avoid the ‘extreme emergencies’ which costs lots) 2) and still make providers profitable 3) and how do we not penalize those who by not fault of their own (didnt smoke etc) got a major health emergency (cancel etc) 4) and how do we encourage patients to take better care of them selves (by eating healthy and exercise etc).

  33. willid3

    well usually when they go wrong, its normally because of a politicians wanted some thing done. and thats not just those who got elected either

  34. Suvy

    That’s why we need health savings accounts. I also think much of our unhealthy lifestyle is cultural as well. We’ve got people who spend their entire 20’s, 30’s, and early 40’s to make money by neglecting their health and spend all that money they made in their youth on fixing their health in their late 40’s, 50’s, and 60’s.

    What we really need to do is to fix our culture, environment, and surroundings. In other words, we need to change the way people fundamentally think about things. That’s much more difficult to do.

  35. willid3

    hm, so Medicare is going broke because doctors arent accepting it? does that mean health insurance companies are too cause doctors dont accept all of their plans? and SS might eventually go broke, but i dont see any thing that will reliably replace it. the 401k has been a failure. and with pensions going away, that leaves exactly what to replace SS that has a proven track record? and what company doesnt riase in fees etc when needed to? or reduce what it offers when it needs too? can you none?

  36. Suvy

    I agree. That being said, if you’re powerful, you should be fair and just. This is coming from a guy who doesn’t believe in the idea of fairness or equality.

  37. connie hawkins

    medicare is broke because its an unfunded mandate, and reeks of fraud and corruption.. it requires mandatory membership and price controls just to stay afloat. aside from it being an inefficient one size fits all solution from washington. my 401k did great. maybe you should take a course in investing. ss is simply a pay as you go ponzi scheme.

  38. connie hawkins

    what part of “unfunded” don’t you understand? if i want insurance, why can’t i just buy it on my own,instead of being forced by the government?

  39. connie hawkins

    austrians hate government being able to spend at will, so they can wage war on the world, and create inefficient unfunded socialist programs.

  40. willid3

    not Medicare is funded directly by taxes. it does have mandatory membership. and price controls is no different than what all insurance companies bar none. and so far it has lower over head costs less than any insurance company does doing the same thing , and it covers those insurers have no interest in covering (because the elderly will absolutely have major needs for care. its part of getting older, and is very natural, and some of that care is because of what was done in their life, and some of it is genetic and would happen no matter what else they had done). no private insurer wants these ‘customers’ as the market for this was eliminated by them long ago) well my 401k did find too thanks for asking. but no every one has the time to recover from the great 2007 debacle. and retiring then was dooming many to failure. and maybe you noticed that 401ks dont allow you to pick stocks so investing is not really what a 401k is

  41. willid3

    and just how much would they save over the years (or less) in them to be able to pay for health care? and we actually have them today. they just arent worth the bother unless you are absolutely sure you wont need any care that year. for any reason. or that you can afford to be injured for the entire year

  42. willid3

    well you can buy it if they offer it. but in the case of what Medicare offers, they dont. they will offer coverage only to bridge the gap from Medicare covers (covering just co-pays for the most part)
    i guess we have different definitions of ‘unfunded’.
    normal definition is there no money set aside to pay for it (whether from taxes or the insurance company). which isnt the case here. there are taxes that are only for Medicare. and your premium doesnt really cover much of what you get in health care. since just getting a doctor’s signature on a form can cost you $100 or more. needing more than that, expect to pay a lot more. the standard physical exam, can and will cost $1000. do you think you pay enough to cover that?

  43. Suvy

    If people had the opportunity to buy imported drugs or go to other places for surgeries that may even be necessary, I don’t think it’s crazy to see costs drop by 80%.

    Many states already have health savings accounts–particularly for state employees and other people of the sort. If the entire country started doing this, you’d see costs come smashing down everywhere because people would actually watch the money they spend.

  44. Suvy

    I’m not an Austrian by any stretch of the imagination, but there’s all sorts of good reasons to fear debt. Every traditional religion is highly anti-debt and debt can be very socially destabilizing. Tradition doesn’t lie.

  45. willid3

    while i can see being able to buy imported drugs saving money (as long as they came from the plants that are US inspected. give the pharma bunch choice and they will just move the international production of drugs to other non inspected plants), and if we get the drugs there is no telling what we will get. course there is the problem of bogus drugs, but we have it today. it would just be worse.
    still dont see how having a health savings account helps much (and we already have that nationally. but it does depend on your employer). since you cant and wont know how much to save. about all it would do is reduce the times you go to the doctor, even if you really needed it. leading to worse problems later. course if we used just health savings accounts, there might be fewer doctors than now. and prices could go up, since there really is an economy of scale.

  46. connie hawkins

    The problem is i’m forced to pay into medicare. Medicare is essentially a government monopoly. I really have no choice. Medicare is the largest payer for medical services in the United States. Its size and market dominance heavily influence how all of American health care is organized. Over the past three decades, the camp that favors government control and regulation has been calling the shots in the Medicare program, without success. Medicare spending has continued to rise very rapidly, and the program is now projected to become insolvent in 2024. i’m sorry but i’ll take strong competition in a functioning marketplace over big government micromanagement to improve quality and reduce costs any day. it works in every single industry. If medicare were such a great program, it would be voluntary instead of mandatory.

  47. willid3

    Imagine that, Medicare is a government program, who would of known?

    well how does one have a functioning free market system, when only one side (sellers) actually know what can or should be done? there is no way patients will know what procedure, drugs, etc can be used to address any particular situation. and given that all of the health care costs (including those paid by private insurance companies, unrelated to what medicare does or doesnt do ) have been going up. and while in the old days maybe some of that was really driven by defensive medicine, now its more likely to be driven by the pay for health care system we have. thats where all providers make by proscribing treatment, not how well that treatment works.

    there is no way to have a ‘functioning market place’ in health care without equal levels of knowledge by sellers (providers) and buyers (patients). this particular need will not work with free market ideas without a solution for that.

    Medicare costs less than private insurers do, provides better and more care than insurers do.

    Medicare only became the biggest because insurers dont want to be. after all they dont want to pay for any care they dont have period. cause all of that care is a cost to their business, and reduces their profits. and in reality insurance (all of them of any type) is nothing more than a private version of medicare. only they have an incentive to reduce your care so they can make a profit. and you have 0 chance of being able to deduce which of their plans will fit you, as they have no incentive to provide that, but they can and provide marketing info, which of course you pay for. but it wont really help much, since its driven by the plan document. which is a couple of 1000 pages of legalese defining what is covered or not.

    now to the 64,000 question, why is in the US we pay about 3 times the next highest countries health care cost, and get worse results? almost all of them have government run plans. they pay less for drugs. and surgeries. just about every costs them less. only the US has extremely high care cost.

  48. connie hawkins

    i have no idea what study you’re citing that says the usa pays 3 times more for worse service. There was a book published in the Fifties called “How To Lie With Statistics”. i think it would be very difficult to make such a comparison, and conclude that not enough government control was the cause. each country has its own set of variables to consider, and are not homogeneous.

    Healthcare spending is higher in the US because patients often recieve treatment that are denied in other countries. Older Americans have arthritic joints replaced to treat pain and disability. They are also more likely to have open heart surgery when they have advanced heart disease, and advance cancer treatments when they have advanced cancers. They also recieve very expensive treatments in their last three weeks of life.

    Premature children are also are more likely to receive neonatal intensive care for extended periods. And, people injured in accidents receive more extensive reconstructive and cosmetic surgery; and longer rehabilitation services. We are also paying for the coasts of more than 20 million illegal immigrants who should have their healthcare costs paid by their own countries.

    the health care system is “dysfunctional” because the system of third-party payments from insurers removes the patient as a major participant in the financial and medical choices that affect costs. government intervention has expanded insurance availability through programs such as Medicare and Medicaid, this has exacerbated the problem. theres cost-shifting from government programs to private payers. Low reimbursement rates for Medicare and Medicaid have increased cost-shifting pressures on hospitals and doctors, who charge higher rates for the same services to private payers, which eventually affects health insurance rates.

  49. John Daschbach

    Cullen, that was very good.

    The role of military is at the core of all deep political science. The military is a dynamic political entity like any other. Much, if not most, of the popular technological gadgets we can’t live without today are a direct result of military R&D. How does the role of the military shape political dynamics over different regime scales? How does it shape the economies of the underlying regimes? Clearly all have anecdotal cases on either side of a pre-selected view. Like most political cultures we have done good and bad things with our military force. But there is little doubt that technologically the US private sector has benefitted massively from the propensity of the Military-Industrial-Politcal quorum to push the state of the art in certain technology at huge taxpayer expense. It’s unlikely Silicon Valley would exist without the fundamental economic driving force of the military (and later NASA) in shaping it’s roots from the 1950’s through to the late 1980’s.

  50. connie hawkins

    although, the actual technology was probably developed by private contractors hired by the government.

  51. gbgasser

    “although, the actual technology was probably developed by private contractors hired by the government.”

    So? Whats your point?

    Johns point is that the “funding” came from public not private sources. It, more than likely, would NOT have been done if only private funding were used. No individual or group of individuals wants to (nor should they) put everything they have into development projects that will have many dead ends and a few (unknowable form the time of investment) incredible breakthroughs. Its definitely true that it would not have happened as quickly or on the scale it did without massive public investment.

    The fact that the govt paid a private company, hired them as you say, is irrelevant. The govt doesn’t keep factories open and ready for use when they want something. They find companies with the basic abilities to develop the things they want and pay for the engineers, physicists etc to do the R&D

  52. gbgasser

    “This is coming from a guy who doesn’t believe in the idea of fairness or equality.”

    Hmmmmmm thats interesting.

    Now if you mean equality, as in everyone should have exactly the same, then I don’t believe in that either….. in fact I doubt anyone does. I suspect your “fairness” is pretty much a synonym for equality

  53. connie hawkins

    i guess i don’t really see how that is evidence that government is better than the free market, when it was the free market that actually developed the technology. duhh.

  54. willid3

    never said they made the conclusion that there was too much or too little government control. nor did they. the studies arent that hard to do either. and can do no more than looks at the amount of money spent vs GDP. and then divide that by number of people. mostly 4th grade math involved. i think i mentioned that older folks have a greater need for health care, and that actually a natural event because bodies break down as they age (maybe you have noticed that). its also why private insurers quit providing primary insurance for them, cause they will absolutely have care needs. and every one can have high health care needs in the last 3 weeks of their life, unless they expire naturally. doesnt just apply to older or the very young. cause just about any one can have that situation (consider any one that is injured and dies. at any age). and its true that patients arent as involved as they could be financially. or medically. but to be highly involved would require them to also be extremely knowledgeable about not just the costs but the course of treatment. cause there can be multiple treatments for any one condition and each will have different costs and effectiveness. so how do you choose among them? and unless you have a medical degree and have access to cost information (neither you are likely to have) you cant do that.

    and its not just medicare and medicaid that cause cost shifting pressures. private insurance do that too, as they usually start with those programs reimbursement rates as a starting point for their reimbursement rates. and then we add in the ER costs for the uninsured as those also get passed onto the ‘full retail’ price. which isnt published any where. course there is also the delayed payment from private insurers, they will delay payment to providers for up to 90 days. that also raises cost for the full retail patient.

    but we mustnt forget that we have a pay for services system, which encourages some providers to prescribe more care (or some times more expensive care) as they will make more from it.

  55. willid3

    true. but the need was from the government. the private sector saw no such need so wouldnt have created it. one thing that is always true, if the private sector doesnt see a need for any particular technology they will not create it. and they will not do the basic research that many technology creations need (since that research cant directly be turned into a product or service). they also have a very short time length for return on investment. usually measured in months or quarters.

  56. willid3

    i dont think that was the point here. it was that from military needs technology was created (an example is the computer. the military had a need to calculate trajectories for artillery and ships guns, or to do a census, or to implement social security, or to go to the moon. long before there was ever a need from business to do business work)

  57. willid3

    well depending on what state you live in (and almost all mandate this) and you have a car, you are mandated to have a driver license and car insurance.

  58. connie hawkins

    aside from the fact you haven’t named a source, thinking you can compare entire healthcare systems of different countries, that are in no way homogeneous, by simply using a simple calculation is beyond ridiculous. and simply put, americans may pay more because they get more. no two countries are exactly alike, and many variables must be considered for any valid comparison to be made.

  59. willid3

    really? we dont know how much as a country we spend on health care? why would you think we wouldnt? since we seem to know how much we spend on just every thing else? we even know what we spend on various treatment options. like MRI’s for example. we know how much they spend on the same exact procedure using the same machine in say Japan. care to guess who pays more for either?
    and for source of comparison data (just the numbers mind you) we can looks at the OECD studies that show on average we pay $8,000 a year and that reflects about %17 of GDP per year. and those are 2012 numbers. that translates into 17 cents of every dollar spent in the US is for health care. by the world wide average was about 3,000 per year.

    course if you dont like that source, how about Forbes?

    since you claim that Medicare and Medicaid are more expensive for what they do, where is your data for that?

    and how do you know that the US is all that different from other countries? where is your data for that?

  60. connie hawkins

    like i said the americans pay more because they get more. americans get treatment that is often denied in socialized countries. americans also lead unhealthy lifestyles, have a high violent crime rate, and have more automobiles accidents, thus require more treatment. socialized countries also have price controls that stifle innovation and research, and are basically free riding on america. americans live in the country that makes far and away the most productive innovations in pharmaceuticals and healthcare in general—innovations made possible by the profit motive. and then theres a thing called favorable outcomes. america also has a thing called lawyers. now plug all that into your silly calculation.

  61. willid3

    do we? we pay more for the exact same drug produced in the same plant on the same line that is sold for less world wide than in the US . we pay more for the exact same procedure using the same equipment than other countries do. and its more of talking point that ‘socialized’ medicine denies more treatments than we do using our version. which generally means if you cant afford to pay for it, you cant get it. how is that any different than the ‘socialized medicine ‘ denial of treatment? or if the insurer wont pay for it, you dont get it. it hard to tell if the world is free riding on the us innovation, when the plants aren’t in the US. its not like only the US is the only country with lawyers is it? now we do have the most guns in the country, so we do have lots more gun violence than others do (unless they are in the middle of a civil war).

  62. connie hawkins

    yes, socialized countries have price controls on drugs, and are basically free riding on america. if america had price controls many of these drugs may never have even been developed. and aside from higher demand its more so the fact you actually get the needed procedure in america that increases per capita expenditures, whereas in socialized countries many treatments are either denied or delayed.

    btw: “The cost of defending malpractice claims, including awards, legal costs, and underwriting costs, was an estimated in 2001:

    USA: $6.5 billion
    Canada: $237 million “

  63. Joe Franzone

    How is this philosophy any different than a radical lefist philosophy that wants to government to “change the way people fundamentally think about things”

  64. Joe Franzone

    Connie, this comment doesn’t make sense. Assume no doctors accepted medicare, then there would be no payouts, and yet if funds were still coming in, the program would be the opposite of broke.

  65. willid3

    and thats actually a state rule not a fed one. and the states that have restricted malpractice claims? California. and Texas. dont seem to have had any lower medical inflation than those who dont. and when put on the spot, malpractice insurers report that they only pay 2% of costs on claims. and that report came under oath. and oddly enough there is some thing to the we get more drugs because we allow them to charge a lot more. cause it a lot of cases big pharma wont even bother to produce a drug unless they can insure they can make a profit on it. which is what you would expect of business. even if there is a definite need, they will not create the drug unless its profitable, which means of course that you and i have been denied a better drug, just because its not profitable

    and its not like we dont have procedure and drugs denied in the US we absolutely do. we deny it if the insurer wont pay for it (and doctors wont even talk about it). and we will deny it if you cant afford it.

    no matter what it might cost you as the patient

  66. gbgasser

    No one is claiming that the govt is “better” at developing technology, the point is simply that the private sector doesn’t do these great things by themselves. Most of the truly life changing things we have came about in the time they did ONLY because huge public investments were made. Investment is SPENDING. The govt spends and we all receive.

    Its the hard core “govt can’t do nothing” folks that are wrong about what it is that govt does and HAS DONE. No one I know is wanting the private sector to go away (as if thats even possible) but there are those who think the govt could go away and we’d be better off. They are fools who don’t know what our govt has done through history.

  67. gbgasser


    I can tell you as a health care worker, if “costs” drop 80% a lot of us are going to default on loans and lose jobs. Those costs are the other side of our “incomes”. 80% drop in health care costs would not be good for anyone. It really doesn’t matter how much health care costs it only matters how many people can afford it.

  68. gbgasser

    You can just buy it on your own. What you can’t do now (theoretically) is NOT buy it. No difference than being a car owner who wants to drive on public roads. If you are going to live a life which might put you in a situation where you incur a traumatic injury or you develop a very rare condition, you need to be paying into the pool. Sorry its called having some skin in the game.

  69. Suvy

    When I was growing up, we always used health savings accounts for almost all of our out of pocket expenses. It worked very well for us.

  70. Suvy

    This is a stupid question. Our culture is degraded, materialistic, and consumerist. Much of the way we view the world is really fucked up. My statement of saying we need to change the way we look at this isn’t supposed to be political at all. It’s supposed to be cultural. That can happen whether we take up left wing or right wing policies. When you’ve got a society that puts material things above health in terms of importance, you’ve got issues. It doesn’t take a rocket scientist to figure that out.

  71. connie hawkins

    i didn’t say malpractice insurance costs were the only cause, just that it was a contributing factor. doctors also prescribe extra unnecessary tests just to avoid being sued, adding to total costs. if you want to see how well socialized medicine works in the usa, look no further than the veterans administration. people die just waiting for test results.

  72. John Daschbach

    In the US we have used high health care costs as a large source of good paying jobs as manufacturing and agriculture have declined in relative job numbers. A developed economy in a world with flexible trade has a huge deflationary pressure on both employment and wages. In the US, health care has provided a channel for high wage domestic employment. But the inequality in access to health care and the potential to ruin people’s lives is unethical. It may well be that using health care as an employment channel is reasonable, but only if we solve the gross injustices in how it is paid for.

  73. gbgasser

    I agree with much of your comment John. Health care really could be an employment channel. We aren’t running out of sick people. Especially if we start including things like personal training for weight loss and even things like Yoga and massage therapy as part of wellness programs. There are lots of ways we can get more people involved in keeping each other healthy and reducing needless hospitalizations.

    Its the payment system, not the delivery system that is screwed up. Its not unlike the privatization of prisons problem. By making it profitable to someone for incarceration rates to be high, incarceration rates will be high. By making it profitable for someone not to pay for someones health care (denying claims etc) it will happen, and it will be unjust.

  74. Joe Franzone

    “Our culture is degraded, materialistic, and consumerist. Much of the way we view the world is really fucked up.”

    – This is a sweeping generalizations that is simply your own subjective opinion. What gives you moral authority to make this claim? And how do you think changes to an integrated system of learned behavior patterns which are characteristic of the members of a society and which are not a result of biological inheritance is achieved to fit YOUR definition of what is “not really fucked up” without imposing policies that fit YOUR beliefs and biases?
    You are right, however, that the imposition of policies to mold a culture that fits one’s personal beliefs is not exlcusive to left wing ideologies/parties. History has show us both sides of the political spectrum have engaged in “social engineering” and it has never ended well.

  75. connie hawkins

    you are obviously not very familiar with how medicare works. medicare stays afloat by using price controls. between that and all the red tape, most doctors accept only a limited number of medicare patients, some don’t accept it at all.

  76. Suvy

    Just go to a large place where people congregate (ex. mall) and sit down. Look at the people around you and write down what you notice. There’s a difference between progress and civilization. Our society may have lots of technology, but that doesn’t make us civilized.

    I DO NOT want to impose my views and beliefs on someone else. All I’m saying is that there’s something horribly wrong with our culture. Asking for more humanity in a world where people behave like robots isn’t trying to impose my views on others. I don’t believe in authoritarianism.

  77. willid3

    well if it is, is a very minor one . turns out its only 2% of their costs. and thats from the insurance companies that actually the claims, and it used to be that doctors prescribed defensive medicine, now? not so much. after all if a provider gets paid more for every service they prescribe (and they do) then its also a way to make more for providers, and that has been so for decades. not so sure that what happened to the VA doesnt happen to any of the providers unless you have proof that is doesnt. do you have an example of a private insurance company and health care provider that had their patient base increased 4 fold, but didnt increase their spending, and didnt have issues with providing care? but then we (the US) has had a very long history of not providing for veterans. going back as far as the 1900s and probably early 1800s. but then again increasing the number of patients by a factor of 4 and not increasing funding is a well known way to cause failure. happens no matter who does it. I guess you one of the minority pushing for more funding for the VA based on need since wars will cause need for vets health care. and the number that died on the waiting lists, even if its just one, is too many right? so what happens to cancel care patients who waiting on care? do some of them die while on a list? and all of that care is private.

  78. willid3

    well debt is used wrong is very bad. and every US business uses it. some do it very badly. other dont. and in the US we dont exactly provide much in the way of education about how and when to use debt. some of which maybe because business depends on sales. which would tend to fall if we knew more about debt.

  79. Suvy

    Including personal training and yoga for people would be EXTREMELY beneficial. That’s the kinda stuff we need more people in our country to start doing. Reducing workweeks so people aren’t sitting in an air conditioned box for 8 hours straight every day would do wonders as well. Rather than prioritizing making money to buy material things, we need to have a culture that prioritizes things like health and character over material belongings. The primary problem is to change the way that our society thinks about these issues. Regardless of where we are on the political spectrum, I don’t think many here would disagree with what I’m saying.

Comments are closed.