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President Obama's Speech: Critical Question Continued

In his speech last night president Obama asked a key question.

President Obama asked, “Where would America be if we had not passed Medicare and Medicaid?”

As I said in my post last night, “President Obama’s Critical Question,”  the president’s question should not have been be a feel-good throw-away line, as it is the underpinning of the base argument, that Medicare and Medicaid have been good for us as a people and for the country. Clearly, the president believes that the answer to these questions is in the affirmative. But, what if the answer is not?  These are areas that I think many need to analyze.
M3 Vs Gold StandardThose who have been reading my articles know that I have a strong concern that the underlying issues in our health care system and our economy are systemic and the areas we are focusing on are, in effect, addressing the symptoms of the problems – not the root causes.  In my upcoming book, “The History and Evolution of Health Care in America: The untold back-story of where we’ve been, where we are, and why health care needs more reform!” I look at the relationship between the rising costs of health care and trace in part one cause to the large expansion of government programs like Medicaid and Medicare.  I also found correlations between the rapid increase in the amount of currency we created, after we jettisoned the gold standard in 1972, and the disproportionate allocations of these new monies to health care and other government subsidized programs like housing.M3 Vs Health Care
The relationship of the Total Money Supply (M3) to our current economic issues I will cover in a later article, but for now look at the direct, almost point for point, correlation of the rise in the total health care spend in the U.S. and the increase in the money supply.  I think there is no doubt that the significant increase in the amount of currency in circulation and the rapid rise of health care costs run hand in hand.  It is very clear, as Sancho said to his master, Don Quixote de la Mancha,

“Whether the stone hit the pitcher or the pitcher hit the stone – it was going to be bad for the pitcher!”

In this case, we can argue later whether the increase in currency drove the increase in costs or the increase in costs drove the need to increase the currency, it was the expansion of Government programs like Medicaid and Medicare that drove the increase in costs.
M3 Vs HousingHousing also rose in a point for point correlation as well.  Unlike with health care, you can see it was an advance indicator.  This make sense, according to economic theory and the basic premise of fractional reserve banking because our the engine of economic expansion (the creation of new money) is debt.  Most preferably mortgage debt.  If housing prices did not rise and new homes and the resultant mortgages did not happen then the banks would have become rapidly out of covenant if the new money existed before the new mortgages were there to leverage against.
Lastly in this article, I include a chart of a few other cost histories, lest we think that all parts of the economy had the same correlation to the increase in the money supply.M3 Vs Commodities  Clearly, wheat corn and eggs did not experience the same effect from the increase in the money supply – nor does it appear they led the need to increase the supply.  I believe that most peoples practical experience is that not all things have risen in value twenty times in the past forty years.  Herein is the potential rub!
I will continue the discussion related to the presidents key question in my next article.  In that I will focus on how the creation of Medicaid and Medicare changed our personal character related to our view of our personal responsibility for our health care and how this change has affected our fiscal habits and our purchasing patterns and trends.
Please feel free to comment on this article or send it to others.  As I have said many times this is not a republican nor democrat issue.  I think this is an American issue.  I am not an economist just someone trying to understand why these things are happening now.  We need pragmatic solutions not demagoguery so lets find out what is the truth and then how we can fix it!

9 Responses

  1. We would be much better off today without both. When the government get’s involved messing with the private sector cost shifting and fraud begins to flourish. During WWII when wage and price controls were put in place, employers offered benefits to keep employees. This led to people no longer paying their way. I can remember our Dr. lived at the end of our street. He made house calls, treated me, and my dad paid on the spot. No insurance, no malpractice, no billing staff. Just an exchange between Dr. and patient. When medicare and medicaid came to visit the doctor, staff sized increased, fees went down. Physicians then passed the cost to the insurance companies, whom Obama likes to make out as the bad guys when they run at such a low profit margin between 2-4%. So now we are left with monies being stolen from both accounts most recently with Obama Care and $500 billion, physicians are still being paid late and less. Nice site Tom I come here all the time, get it by RSS forgot it was yours. Thanks. J.C.

  2. You write in plain Engish, much better than myself. I shall read each post and hope I clicked the correct button. You definitely have a fan. I clicked your link to share it on my face boog page. Thank you.

  3. There is NO solution really; Obama care is not going to solve this “crisis” not left to go bad… Obama put all his eggs into one basket. Until Obama care was passed. By then he is 12 AA steps behind on Economy, Unemployment etc. Killing Bin Laden did NOT make him the shoe in he thought it would. His rate went up for a minute then fizzled out quickly. We already KNEW our EXCEPTIONAL Military would get the Bastard. That said I think it was a hard card not to play as we went into the 08′ Elections. Obama appointed a staff of ignorant advisors apparently. By then it was just too late. As about 87% of America opposed this Healthcare Bill and most likely saw Nancy, make an Ass of herself by saying “Read it so we can pass it”. The President should have dropped it like a hot Potato. Says. I, Remember a Potato defeated the entire Irish People! No joke; intended! Just sayin’ this could defeat him in 12′ Bo’s Potato’ or rotten egg!

    1. Thank you for your comment. I have a book coming out in November, “The History and Evolution of HealthCare in America” I agree with the intent of much of your post but I have to say that I do believe there are a number of ways to fix the current issues we face. This book is focused on the various historical actions taken over the past 200 years that brought us to the current pickle, the inside story of the creation of the Affordable Care Act (Obama-care) and what we can do to really reform our failing health care non-system.
      On the overarching issue of the underlying economy, there are a series of good, but hard steps, we can take that will put us on the road to recovery, but these are not things that we can expect our professional political class to do willingly. They are things that we need to in a united fashion. The problem with that is we are allowing the professional political class to keep us fractional, distracted, and divided.
      Two great quotes come to mind:

      A house divided against itself cannot stand
      – Abraham Lincoln, quoting Jesus of Nazareth from the synoptic gospels

      Divide and Conquer
      -Divide and conquer (derived from the Latin saying Divide et impera by Julius Ceasar) which refer to:
      Divide and rule, in politics, sociology and economics, a strategy to gain or maintain power

      We have allowed our grand experiment as a constitutional republic as ramed by our founding fathers, to be sidelined by a continual progression of short term decisions, some for personal gain, and others for temporary legitimate pragmatic reasons, to become an accumulative usurpation of the rights of citizens to be ruled by a representative electorate, increasingly transformed into that of a democracy(a concept purpously rejected by the framers of our republic) not where the majority rule, but in fact the minority ban. Along the way, we have lost another key factor of our republic that along with the right to representative rule come the obligation of personal responsibility and obligation. Without one the other fails. We have allowed the system to become the engine of perpetual division propagating this rise of the professional political class who is now incentivized to keep us divided. We are, alas, divided and conquered.
      Nothing shows this more than the rising controversy and disparity of opinion over 9/11. How can it be that such an attack only aligned us for a few months? How is it 10 years after that the country is more pissed off about the article by Krugman, or the political right’s response to Krugman’s self-loathing article than we were about the attack in the first place.
      No we cannot expect this Professional Political Class to voluntarily change the engine of their own self-preservation. We need to throw off the effects of their dividing rhetoric and unite despite them in a solution that is correct for all. We need to recast their role to that of the citizen politician as originally described in the practices of the early congresses.

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