Krugman is Wrong

Response by Guest Contributor John Hanson

Vouchercare Is Not Medicare

By PAUL KRUGMAN

Published: June 5, 2011

Do you like to have fun? I do! And since I like to have fun and maybe you do as well, here are some fun facts about Medicare:

• Obamacare (just on its surface) will gut Medicare by $500 Billion. An analysis by Medicare’s chief actuary shows that Obamacare will gut Medicare by $1 Trillion the first 10 years and $4.95 Trillion over 20 years. Good stuff huh? Remember when Paul Krugman was trying to put forth the false premise that Republicans won in November because they tried to scare people that Medicare would be destroyed when actually Republicans won by saying they were going to spend less? Well, this is why Paul could make justify his false premise. The terribleness that IS Obamacare WILL in fact defund Medicare drastically.
• The difference is Obamacare guts Medicare to pay for another entitlement program while Paul Ryan and the Republican’s plan eliminates the “blank check” system in place now so Medicare can still exist down the road.
• Medicare “as we know it” is going bankrupt and is the major factor to the United States of America going bankrupt. In case Krugman didn’t realize it, bankruptcy is also “ending Medicare as we know it.”

What’s in a name? A lot, the National Republican Congressional Committee obviously believes. Last week, the committee sent a letter demanding that a TV station stop running an ad declaring that the House Republican budget plan would “end Medicare.” This, the letter insisted, was a false claim: the plan would simply install a “new, sustainable version of Medicare.”

And it would a sustainable version. Anyone without their head buried firmly in the sand recognizes that Medicare is unsustainable. If we would like it to continue we simply must reform it.

But Comcast, the station’s owner, rejected the demand — and rightly so. For Republicans are indeed seeking to dismantle Medicare as we know it, replacing it with a much worse program.

I’m seeing many attempts to shout down anyone making this obvious point, and not just from Republican politicians. For some reason, many commentators seem to believe that accurately describing what the G.O.P. is actually proposing amounts to demagoguery. But there’s nothing demagogic about telling the truth.

The hypocrisy in this statement coming from Paul Krugman is beyond ridiculous. Paul Krugmn is the ultimate demagoguer! Folks, just read more here and you get a bi-weekly dose of demagoguery in its purest form.

Start with the claim that the G.O.P. plan simply reforms Medicare rather than ending it. I’ll just quote the blogger Duncan Black, who summarizes this as saying that “when we replace the Marines with a pizza, we’ll call the pizza the Marines.” The point is that you can name the new program Medicare, but it’s an entirely different program — call it Vouchercare — that would offer nothing like the coverage that the elderly now receive. (Republicans get huffy when you call their plan a voucher scheme, but that’s exactly what it is.)

Maybe we should all take a moment here, stop what we are doing, join hands and wait for Paul Krugman to demand that the federal government rename Social Security. Wait for it…..

OK, we should all probably stop holding our breath lest any more of us pass out from lack of oxygen. While everyone takes a moment to let the oxygen begin to flow through their systems again, I will examine the analogy. There is almost no similarity between Social Security as it was is originally conceived and how it is currently constituted. Sure it is still a plan to provide retirement to the elderly but operationally it is a complete perversion of the program started under the new deal.

The most glaring change is probably that the program is no longer sustainable. Interestingly, this is the opposite in the case of the Republican changes to Medicare, which are designed to do the exact opposite, take a program that is headed for insolvency and preserve it. Never the less, I am sure I can now rely on Paul Krugman to support the movement to change the name of Social Security to the generational theft and retirement plan.

Medicare is a government-run insurance system that directly pays health-care providers. This is where that whole “blank check” system kinda gets us in trouble. Vouchercare would cut checks to insurance companies instead. Specifically, the program would pay a fixed amount toward private health insurance — higher for the poor, lower for the rich, but not varying at all with the actual level of premiums. If you couldn’t afford a policy adequate for your needs, even with the voucher, that would be your problem.

A government program that makes individuals responsible for themselves, wow I can see why Paul is so bent out of shape by this prospect.

And most seniors wouldn’t be able to afford adequate coverage. A Congressional Budget Office analysis found that to get coverage equivalent to what they have now, older Americans would have to pay vastly more out of pocket under the Paul Ryan plan than they would if Medicare as we know it was preserved. Based on the budget office estimates, the typical senior would end up paying around $6,000 more out of pocket in the plan’s first year of operation.

Of course Paul Krugman is ignoring the fact that the current plan is unsustainable. I don’t think that one can consider a comparison of a plan that is going to go broke, to one that is sustainable, to be intellectually honest.

By the way, defenders of the G.O.P. plan often assert that it resembles other, less unpopular programs. For a while they claimed, falsely, that Vouchercare would be just like the coverage federal employees get. More recently, I’ve been seeing claims that Vouchercare would be just like the system created for Americans under 65 by last year’s health care reform — a fairly remarkable defense from a party that has denounced that reform as evil incarnate.

I seriously wonder where Paul is “seeing” this new found G.O.P. support for Obamacare.

So let me make two points. First, Obamacare was very much a second-best plan, conditioned by perceived political realities. Most of the health reformers I know would have greatly preferred simply expanding Medicare to cover all Americans. Wow, it sounds simple to, when Paul says it like that. Second, the Affordable Care Act is all about making health care, well, affordable, offering subsidies whose size is determined by the need to limit the share of their income that families spend on medical costs. Vouchercare, by contrast, would simply hand out vouchers of a fixed size, regardless of the actual cost of insurance. And these vouchers would be grossly inadequate.

Well, these vouchers would go to insurance companies. What do insurance companies do? Well one thing they do is work to keep costs down. It’s what economists like to call competition. Well they don’t all like the word, but that’s what it is called.

Some may ask, “won’t the insurance companies just take the money and allow prices to continue to rise?” Well that’s why the patient is at the center of the plan. The insurance is bought through the patient with the help of the plan. Now everyone has some incentive, Patients, insurers, doctors, hospitals, etc. Where are the incentives (another important word in economics, hated by many “economists”) in Medicare now?

But what about the claim that none of this matters, because Medicare as we know it is unsustainable? Nonsense. (

WOW! I know because I have read ahead that Paul Krugman is about to explain how Medicare can be painlessly saved, but before he does, I would like to remind him that after all these changes were enacted, it would no longer be Medicare as we know it. So to be clear, Medicare as we know it is unsustainable, and that is not nonsense, but truth.

Yes, Medicare has to get serious about cost control; it has to start saying no to expensive procedures with little or no medical benefits, it has to change the way it pays doctors and hospitals, and so on. And a number of reforms of that kind are, in fact, included in the Affordable Care Act. But with these changes it should be entirely possible to maintain a system that provides all older Americans with guaranteed essential health care.

Wow, with the solution being so  easy, it’s amazing that we haven’t fixed this yet.

Consider Canada, Must we? I believe when most Americans consider Canada, which isn’t that often, they are not envying its healthcare. Also, I don’t believe with all the social and economic differences between the U.S. and Canada, that a comparison of health care needs is even fair. Lastly, this from our neighbors to the north at CTV Edmonton 60% of Canadians would be willing to leave the country for medical procedures, and a reminder that last year former Newfoundland and Labrador premier Danny Williams travelled to a Florida hospital for heart surgery. I will now allow poor Paul Krugman to finish his point, for whatever it’s worth. which has a national health insurance program, actually called Medicare, that is similar to the program we have for the elderly, but less open-ended and more cost-conscious. In 1970, Canada and the United States both spent about 7 percent of their G.D.P. on health care. Since then, as United States health spending has soared to 16 percent of G.D.P., Canadian spending has risen much more modestly, to only 10.5 percent of G.D.P. And while Canadian health care isn’t perfect, it’s not bad.

Sorry, probably should have just told you to skip that part. A comparison of U.S. and Canadian health care in less than 100 words, worthless.

Canadian Medicare, then, looks sustainable; why can’t we do the same thing here? Well, you know the answer in the case of the Republicans: They don’t want to make Medicare sustainable, they want to destroy it under the guise of saving it.

So in voting for the House budget plan, Republicans voted to end Medicare. Saying that isn’t demagoguery, it’s just pointing out the truth.

What we currently have is a generation of Americans (sorry mom and dad, I know you didn’t support any of this) who are destroying the futures of their children and grandchildren, in order to make their own standard of living sustainable. That’s not demagoguery it’s just the truth. Try saying that to Paul, and see what happens. Paul Krugman and those like him would have those retired and close to retirement, tear down everything that has made our country great, individual liberty, self reliance, competition, thrift, responsible behavior, and replace it with Big Government Programs and Bureaucrats. He would have us tear down our country in order to preserve the promises one generation have made to themselves. Paul Krugman has determined that the America of the past can no longer be relied upon to make good on the promises of the America of today. Paul Ryan has boldly determined to do just that. To use the greatness of America to correct some of its weaknesses. My support is behind Paul Ryan, and America, as it was and hopefully will be again.

The Mistake of 2010

By PAUL KRUGMAN

Published: June 2, 2011

Paul Krugman believes in the Keynesian myth. He believes that government can centrally plan an economy. It can’t. Paul is a devout follower and if someone disagrees with him, they are called stupid, wrongheaded or some other condescending name.

People who believe in the Keynesian myth have been proven wrong time and time again through numerous historical and empirical examples. Still, here we are with Paul Krugman arrogantly claiming that we need MORE government spending.

The site is called krugmaniswrong.com for a reason.

Earlier this week, the Federal Reserve Bank of New York published a blog post about the “mistake of 1937,” the premature fiscal and monetary pullback that aborted an ongoing economic recovery and prolonged the Great Depression. As Gauti Eggertsson, the post’s author (with whom I have done research) points out, economic conditions today — with output growing, some prices rising, but unemployment still very high — bear a strong resemblance to those in 1936-37. So are modern policy makers going to make the same mistake?

The same mistake? If they listen to Paul Krugman they’ll be making a far worse one.

Mr. Eggertsson says no, that economists now know better. But I disagree. In fact, in important ways we have already repeated the mistake of 1937. Call it the mistake of 2010: a “pivot” away from jobs to other concerns, whose wrongheadedness has been highlighted by recent economic data.

To be sure, things could be worse — and there’s a strong chance that they will, indeed, get worse.

You know what’s funny? On the surface I could agree with Paul that there IS a strong chance that things will get worse, but he probably thinks it’s because the government isn’t spending ENOUGH money. Of course you can explain to those who believe in the Keynesian myth that government spending (infrastructure, services) comes as a RESULT of economic growth, it is not the cause of it and they’ll just dismiss you as wrongheaded.

And how about the attitude conveyed by today’s liberals, “sure, things could be worse”……..How about “things could be better”!

This “eh, it’s good enough” attitude needs to be voted out of office. Good enough isn’t good enough.

Back when the original 2009 Obama stimulus was enacted, some of us warned that it was both too small and too short-lived. In particular, the effects of the stimulus would start fading out in 2010 — and given the fact that financial crises are usually followed by prolonged slumps, it was unlikely that the economy would have a vigorous self-sustaining recovery under way by then.

If Paul had gotten his way the only thing we would have to show for it, is more debt. If there is no market need for spending to take place, government spending is just diluting tax dollars. That dilution doesn’t make its way into the hands of investors or entrepreneurs who try to grow a business. Those tax dollars go to hiring government (or by proxy a contractor the government pays) workers. They’re told to build a bridge, pave a road or fix some train tracks.

Nothing is produced. No profit is sought. No economic growth takes place.

You’ve just paid people with tax dollars.

By the beginning of 2010, it was already obvious that these concerns had been justified. Yet somehow an overwhelming consensus emerged among policy makers and pundits that nothing more should be done to create jobs, that, on the contrary, there should be a turn toward fiscal austerity. 

This consensus was fed by scare stories about an imminent loss of market confidence in U.S. debt. Ummm, does Paul realize our debt has been downgraded? Seriously, everyone on earth sees that our debt level is unsustainable and Paul Krugman still wants to bury his head in the sand. Every uptick in interest rates was interpreted as a sign that the “bond vigilantes” were on the attack, and this interpretation was often reported as a fact, not as a dubious hypothesis.

For example, in March 2010, The Wall Street Journal published an article titled “Debt Fears Send Rates Up,” reporting that long-term U.S. interest rates had risen and asserting — without offering any evidence — that this rise, to about 3.9 percent, reflected concerns about the budget deficit. In reality, it probably reflected several months of decent jobs numbers, which temporarily raised optimism about recovery.

This is a very dangerous mindset. Because there has not been a massive increase in interest rates (yet) he honestly feels he’s “won” the argument. Of course he ignores (well maybe he just dismisses) the Feds actions to artificially keep rates low. They’re doing this by keeping the federal funds rate near zero AND printing more (fake) money to pump into the markets.

The reason this is a dangerous mindset is because the perils of the Fed’s actions are obvious to everyone except the Nobel Prize winner Paul Krugman, inflation. We ARE experiencing it right now. It’s not theoretical. It’s happening.

The weird part is, it depends on the day whether or not Paul says inflation is here. Apparently today the dollar is not THAT weak, but a few weeks ago our weakened dollar was the cause of an exporting boom that only Paul Krugman is aware of. Go figure.

But never mind. Somehow it became conventional wisdom that the deficit, not unemployment, was Public Enemy No. 1 — a conventional wisdom both reflected in and reinforced by a dramatic shift in news coverage away from unemployment and toward deficit concerns. Job creation effectively dropped off the agenda.

That’s assuming you believe government creates jobs. And it’s not just deficit, the debt as a whole is the major factor, because as it grows the interest paid on it becomes ever burdensome.

So, here we are, in the middle of 2011. How are things going?

Well, the bond vigilantes continue to exist only in the deficit hawks’ imagination. Long-term interest rates have fluctuated with optimism or pessimism about the economy; a recent spate of bad news has sent them down to about 3 percent, not far from historic lows. 

And the news has, indeed, been bad. As the stimulus has faded out, so have hopes of strong economic recovery. Paul really thinks that the weak economy is because the stimulus faded!  Hahahah! I have to laugh otherwise, I’d cry. Yes, there has been some job creation — but at a pace barely keeping up with population growth. The percentage of American adults with jobs, which plunged between 2007 and 2009, has barely budged since then. And the latest numbers suggest that even this modest, inadequate job growth is sputtering out.

The administration’s unemployment numbers are juiced anyway. They don’t include people who have stopped looking for work and those that are under-employed as well. The only way the government can “stimulate” the economy is to cut spending by a significant amount, cut taxes by half that significant amount and get out of the way.

So, as I said, we have already repeated a version of the mistake of 1937, withdrawing fiscal support much too early and perpetuating high unemployment.

Yet worse things may soon happen. I’m guessing Paul won’t say “we’re spending too much.”

On the fiscal side, Republicans are demanding immediate spending cuts as the price of raising the debt limit and avoiding a U.S. default. If this blackmail succeeds, it will put a further drag on an already weak economy.

No it won’t. It NEEDS to be done. This isn’t some insulated political bickering. We are going broke and we can either address our problems as grownups or name call and bury our head in the sand as Paul and the rest of the Democrats are doing.

Meanwhile, a loud chorus is demanding that the Fed and its counterparts abroad raise interest rates to head off an alleged inflationary threat. As the New York Fed article points out, the rise in consumer price inflation over the past few months — which is already showing signs of tailing off — Yippie! Inflation shows signs of “tailing off”! Does that make you feel warm and fuzzy? reflected temporary factors, and underlying inflation remains low. Yeah, if you ignore those pesky food and energy prices as Paul likes to. (The CPILFENS is what Paul is referring to which was created to measure real estate prices, not deny reality) And smart economists like Mr. Eggerstsson understand this. But the European Central Bank is already raising rates, and the Fed is under pressure to do the same. Further attempts to help the economy expand seem out of the question.

Will it ever dawn on progressive liberals that they can’t “help the economy expand”?

So the mistake of 2010 may yet be followed by an even bigger mistake. Even if that doesn’t happen, however, the fact is that the policy response to the crisis was and remains vastly inadequate.

Do you ever wonder how much Paul thinks would be adequate? $787 Billion? $1 Trillion? 3 Trillion? Or will even $3 Trillion not be enough so Paul thinks we need $3 Trillion and $1?

This is what Keynesians do. If the government spends money and the plan fails, they didn’t spend enough money. If they spent enough money and the plan fails, they didn’t spend it the “right” way. There is always an out. There is always an excuse, because they are incapable of grasping the very simple concept that you can’t centrally plan an economy.

Those who refuse to learn from history are condemned to repeat it; we did, and we are. What we’re experiencing may not be a full replay of the Great Depression, but that’s little consolation for the millions of American families suffering from a slump that just goes on and on.

It will never cease to amaze me how Paul Krugman can get things so perfectly and utterly wrong.