Friday, December 30, 2011

Another Economist Off The Rails

Laura d'Andrea Tyson has now joined the chorus of academic economists spouting economic nonsense. (Although Tyson is more a politico and a professional board sitter these days and is definitely one of the 1%).

Tyson has a piece in today's NYTimes attacking the Wyden-Ryan proposal to reform medicare that would move medicare more into the free market. Tyson notes that the cost of medicare, in the past ten years (and especially in the last three years) has grown more slowly than private insurance. That is an absurd comparison.

Medicare grows by whatever it's budget is and that's that. Private insurance is beset by changes in state legislation (and virtually every state has dramatically altered it's health insurance rules making them more expensive by mandate) in the past ten years. Tyson also seems relatively unconcerned that medicare has a $ 66 Trillion unfunded liability into the future while private insurance has a zero unfunded liability into the future.

Tyson's argument is like saying if I buy now, pay later, then the cost is zero.

Reading Tyson's piece in today's NYTimes is one more trip down the anti-capitalism roadway that so many "star" economists seem to have taken. Economics to these folks is more about have the right politics than about economic logic and economic facts.

Before medicare came into existence, health care was cheap and plentiful and health insurance cost almost nothing. Go back and read newspapers and articles about health care in the world pre-1964 and you will find that health care was a backburner issue. Health care did not become a major problem until the last thirty years and most of our problems with health care provision have to do with too much government, not too little.

The free market is the best way to allocate a scarce resource. Subsidies for the less affluent are a humane way to deal with poverty and low income families. Entitlements for Warren Buffett and Bill Gates are a prescription for disaster and result in a $ 66 Trillion unfunded liability. Where are economists when we really need them?

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