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Magnificent Failure of ObamaCare
by Prof Gary North
Jan 06, 2014
the point of view of a defender of liberty, ObamaCare is the most
magnificent welfare state program of our generation.
Washington, DC -- Premium
expenses are going up for most people. Deductibles are going up for most
people. Cancellation letters are going out to millions of people. The number
of people signing up is less than the number of people who have received
policy-cancellation letters. In short, the costs are being front-loaded, and
the benefits are being back-loaded.
before, welfare state politics has been based on a specific strategy:
"Benefits first. Costs later." This is called front-loading and
back-loading. The best examples of this process are Social Security and
Medicare. The costs are now coming due for these two programs. According to
Prof. Lawrence Kotlikoff, the back-loaded cost of the two programs is now in
the range of $200 trillion, present value. But no one really cares. Those
costs will be imposed in the future. Politicians care only about the
immediate future, namely, the next election.
politicians come to the general public, and they promise that the state will
intervene on the side of the middle class. The state will do so also to help
the poor. The costs will be borne exclusively by the rich. Politicians are
careful never to define how much money is going to be paid by the middle
class, especially the upper-middle-class. This is always kept secret. The
assumption is that only the wealthy will pay for the benefits that will be
given to the middle class and the poor.
step-by-step, the costs are imposed over years. There is a kind of
definition creep involved. More and more of the middle class is defined as
being rich. This is never made public. But it does become operational when
the tax bills come due.
around this has been to increase the amount of borrowing by the federal
government, and by other agencies of state and local governments. But,
primarily, it has been done through the federal government.
to keep interest rates low, the Federal Reserve System intervenes in order
to create money out of nothing, in order to purchase the IOUs of the United
States Treasury Department. This conceals the extent of the cost of the
welfare state programs that have been passed into law by an enthusiastic
Congress, and supported by an enthusiastic electorate.
front-loading the benefits, and by back-loading the costs, the politicians
have extended the welfare state to encompass virtually every area of life.
is the exception. ObamaCare is front-loading the costs, and it is
back-loading the benefits.
the nature of all insurance. Insurance programs force you to pay for the
coverage now. You will receive the benefits later, if in fact you become
eligible by means of some disaster in your life. Whatever you have insured
against takes place, and you receive payment from the insurance company.
case, however, the costs of insuring the poor must be borne by people who
buy the policies now. The poor cannot be excluded because of prior
conditions. So, this is not insurance; this is a welfare state program, pure
and simple. But it is being covered by the illusion that it is, in fact, an
have pre-existing conditions that exclude them from getting insurance in the
free market are rushing to sign up for the welfare program. People who are
generally healthy, meaning younger people, are not rushing to sign up. They
don't want the program. They have been outvoted. They had not understood
that they are the targets of the program. They do not understand the
economics of health insurance, when coupled with the economics of ObamaCare,
have made them the big losers. They are not rich. They are barely middle
class. But they are the ones who are going to pay the freight for the poor
people and the old people who are sick and cannot get insurance.
front-loading is taking place today, in a congressional election year. The
pain will be imposed on middle-class voters and younger voters prior to the
election. It will build all year long.
subsidies come in the form of tax credits, but half the voters do not pay
income taxes. So, they will get no relief. Supposedly, the government will
pay for any increased costs of their insurance policies. This will prove to
be an illusion. It is a poorly timed illusion from the point of view of the
Democrats, and a magnificent illusion from the point of view of the
Republican Party. The Republican Party voted across the board against the
program. So, it took a position in 2010 that it would front-load the cost
and back-load the benefits.
the liberal media piled on the Republicans, calling them heartless opponents
of the poor and the weak. In 2012, this proved to be an ineffective attack
on the Republican Party. In 2014, the costs are being imposed directly, and
the Republicans have escaped the political liability. We now see Democrats
running for cover. All of a sudden, ObamaCare needs delays. All of a sudden,
ObamaCare does not look like such a good idea.
the timing of the increased premium costs, which are coming this year, the
traditional back loading strategy has hit the Democrats right between the
eyes. It took too long to get from the promise, which was made in 2010, and
the benefits, which are only appearing this year. But the benefits are being
extended only to people at the margin. They are people who almost certainly
would have voted for the Democrats anyway. Meanwhile, the costs are being
imposed on voting groups, especially young adults, who tend to vote for the
Democrats, and who are now caught by the details of the law that Nancy
Pelosi said Congress would not be allowed to read until Congress voted for
the bill. Congress voted for the bill, and now the targeted losers are
finding out just how large the bill really is. They're finding this out in
an election year.
the unique situation in which all Republicans voted against the bill, it is
now possible to gain political acceptance by Republicans for the principle
of the repeal of ObamaCare. That will have to require the election of a
Republican president and Republican majorities in both houses of Congress in
2016. If, as expected, Democrats lose ground in the Senate in 2014, the
scene will be set for a complete repeal in 2017.
ability of Republican moderates to get a replacement program is minimal.
There will be domestic opposition from the Tea Party movement. But there
will not be opposition by the Tea Party movement to repeal. So, it will be
much easier to repeal ObamaCare than it will be to get a Republican
substitute. This has not happened before. Always before, some Republicans
voted with the Democrats on particular welfare state programs. Unified
opposition across the board has not happened before. But it happened this
time. This makes ObamaCare unique.
insist that once the program gets rolling, a majority of voters will support
it, and Democrats will be re-elected. This is Harry Reid's position. He has
stated clearly. This is the position of the mainstream media. They are
hoping, though of course not praying, that there will be enough
beneficiaries on the rolls to offset the losers who had their policies
canceled, their premiums increased, and their liabilities increased. So far,
this hope is an illusion.
stories are going to begin very soon. These horror stories will be people
who have had their deductibles increased, and who are hit by a medical bill.
They will find out that the deductible must be paid every year. If they get
hit by a multi-year disease, they will pay these high deductibles every year
from now on. The political pain will be intense. While the mainstream media
may not feature these stories, there will be lots of them on the alternative
media. Horror stories gain readership. These are human interest stories.
There are going to be thousands of them every year.
Democrats have made a mistake. They have voted as a party in favor of a
program that has front-loaded the costs and back-loaded the benefits.
– FM Duck
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