Patterico's Pontifications

4/14/2009

Obamanomics: Like economics, but backwards

Filed under: General — Karl @ 6:24 am



[Posted by Karl]

Robert J. Samuelson deconstructs Pres. Obama’s economic vision:

What Obama proposes is a “post-material economy.” He would de-emphasize the production of ever-more private goods and services, harnessing the economy to achieve broad social goals. In the process, he sets aside the standard logic of economic progress.

Since the dawn of the Industrial Age, this has been simple: produce more with less. (“Productivity,” in economic jargon.) Mass markets developed for clothes, cars, computers and much more because declining costs expanded production. Living standards rose. By contrast, the logic of the “post-material economy” is just the opposite: Spend more and get less.

Consider global warming. The centerpiece of Obama’s agenda is a “cap-and-trade” program. This would be, in effect, a tax on fossil fuels (oil, coal, natural gas). The idea is to raise their prices so that households and businesses use less or switch to costlier “alternative” energy sources such as solar. In general, we would spend more on energy and get less of it.

The story for health care is similar, though the cause is different…

***

Together, health care and energy constitute about a quarter of the U.S. economy. If their costs increase, they will crowd out other spending. The president’s policies might, as he says, create high-paying “green” or medical jobs. But if so, they will destroy old jobs elsewhere. Think about it. If you spend more for gasoline or electricity — or for health insurance premiums — then you spend less on other things, from meals out to home repair. Jobs in those sectors suffer.

We already have an example of how this plays out in the energy sector.  Obama has used Spain’s green initiative as a blueprint, but a study from King Juan Carlos University in Madrid found that every green job created by the Spanish government destroyed an average of 2.2 other jobs, and that only one in 10 were permanent.  Obama promised to create three million “green jobs” which suggests he would kill at least 6.6 million (or as many as 11 million) jobs elsewhere in the economy.

Obamanomics: Progressive, but not progress.

–Karl

47 Responses to “Obamanomics: Like economics, but backwards”

  1. This is the primary reason why I started shunning all the enviro groups many years ago – I used to contribute (and participate in) to groups like The Nature Conservancy and The Sierra Club. But as the 90’s progressed, it became clear that their goals had been hijacked drastically, to the point where it was blatantly obvious that they wished for all mankind to go back into their caves, and for us to help kill off our species in order to save Mother Gaia. They think we’re a pestilence on the earth that must be destroyed in order to save it. The tragedy is that there are real and worthwhile enviro problems that we should be addressing, but instead we’re getting sidetracked by the wish for broader social controls in the guise of saving the planet.

    Dmac (1ddf7e)

  2. Thanks for posting this. There seems to be almost no one else in the MSM questioning the assumption that green = green. Skepticism is supposed to be a virtue, so where are the skeptical journalists?

    Brother Bradley J. Fikes, C.O.R. (0ea407)

  3. Your question is rhetorical, Bradley?

    Dmac (1ddf7e)

  4. Command and control has worked out so well everywhere else it has been tried. Oh yeah, they just did not try hard enough …

    JD (8918e5)

  5. …every green job created by the Spanish government destroyed an average of 2.2 other jobs, and that only one in 10 were permanent.

    Holy crap! Rick Santelli was optimistic when he said Obama’s stimulus would never give rise to more than a 1.0 multiplier. (Link at 4:15)

    They are pretty much of the notion you can’t buy your way into prosperity. If the multiplier that all of these Washington economists are selling us is over 1, then we never have to worry about the economy again! The government should spend a trillion dollars an hour, that way we’ll get 1.5 back!

    Armadillo (211a15)

  6. Small is beautiful. Less is more. Freedom is slavery.

    Official Internet Data Office (4fbbd2)

  7. Math is hard.

    Al Gore (a24890)

  8. If you think math is hard, try science, Al.

    Official Internet Data Office (4fbbd2)

  9. The issue with the multiplier is it works if there is “excess capacity” in the marketplace for goods and services people really want.

    This is long and boring but suffice it to say “doing more with less” is wealth creation.

    Giving more resources to those who are least productive while taking it from those who are most …. is a problem.

    Jimminy'cricket (637168)

  10. Hey, you guys. You’re obviously right wing extremists and those people with video cameras at the tea party rallies tomorrow will be DHS anti-terrorism agents. Clinging to guns and religion again, I see.

    By the way, “terrorism” now only applies to tea parties.

    Mike K (2cf494)

  11. Command and control has worked out so well everywhere else it has been tried. Oh yeah, they just did not try hard enough …

    When I was in academia the standard line was that command & control hadn’t worked because the right people hadn’t done it yet.

    Tully (c2f070)

  12. The Right People…
    One disincentive for the right people to attempt the implementation of a C&C economy/government, is that historically, those that do, eventually end up at room-temperature through less-than-optimum circumstances (Damn, those pitch-forks are sharp!).
    Plus, it just doesn’t work, but that has never stopped fools or academics in the past.

    AD - RtR/OS (e50e17)

  13. Obama promised to create three million “green jobs” which suggests he would kill at least 6.6 million (or as many as 11 million) jobs elsewhere in the economy.

    OK, so he’s taken care of killing the elsewhere jobs, so where are the green jobs?

    Dave (037445)

  14. When I was in academia the standard line was that command & control hadn’t worked because the right people hadn’t done it yet.

    Comment by Tully — 4/14/2009 @ 9:13 am

    That is indeed the narrative, as they say…

    Government regulation in general is a good thing, you just need the right kind of people doing the regulating.

    Comment by TEH NARRATIVE — 4/5/2009 @ 1:41 pm

    carlitos (fd4646)

  15. A Wall Street Journal blog snottily dismissed the study by noting that the study’s research director http://patterico.com/2009/04/14/obamanomics-like-economics-but-backwards/had founded a libertarian “think thank” that may have taken funding from Exxon Mobil.

    But of course they make the same disclaimer with studies done by leftists. To do otherwise would be biased and unprofessional, and if there’s one thing you can trust the MSM to be, it’s unbiased and professional.

    Brother Bradley J. Fikes, C.O.R., (3617fc)

  16. Actually, I was aware of the WSJ blog, but skipped it b/c of this:

    The money the government has spent on clean energy may have edged out other government spending, but it’s hard to see how it could have edged out private-sector spending, especially when the Socialist government there has reduced corporate income-tax rates, most recently this past January.

    The WSJ blogger seems to lack a grasp of where the public sector gets money to spend.

    Karl (f07e38)

  17. Together, health care and energy constitute about a quarter of the U.S. economy. If their costs increase, they will crowd out other spending. The president’s policies might, as he says, create high-paying “green” or medical jobs. But if so, they will destroy old jobs elsewhere. Think about it. If you spend more for gasoline or electricity — or for health insurance premiums — then you spend less on other things, from meals out to home repair. Jobs in those sectors suffer.

    Back during the ’08 campaign, my cubicle neighbor — a seemingly sweet woman who instantly becomes vicious and hateful when a Republican’s name is mentioned within earshot — expressed her support for socialized medicine. I said as tactfully as I could that such major shifts always have unintended circumstances, such as the assured devastation of the private health insurance industry.

    “Who cares?” she said. “Let ’em go broke!” To which I replied, “Did you ever think about the millions of people employed by the health insurance industry? If they lose all their jobs that will be bad for the economy, and they’ll have to get government health care and drain the system!”

    Silence from over the partition. She hadn’t thought of that.

    Typical S.F. liberal.

    L.N. Smithee (759a2c)

  18. Typical S.F. liberal…who also happens to be from San Francisco.

    AD - RtR/OS (e50e17)

  19. L.N. Smithee,
    So what if all the health insurance companies go bankrupt? We’ll just put a tax of 23,00000 percent on the rich and there’ll be plenty of money for health care! And free unicorns for everyone!

    Brother Bradley J. Fikes, C.O.R., (3617fc)

  20. command & control hadn’t worked because the right people hadn’t done it yet.

    This is true on its face. After all, I have not been given control.

    Christian (abaa8f)

  21. What exactly are Green jobs. Is there some problem that needs fixing. Seriously. What problem are we trying to fix by this nonsense.
    Anyone?
    Beuhler?

    gus (36e9a7)

  22. So what if all the health insurance companies go bankrupt?

    That’s fine with me. If those parasites disappeared, the world would be a better place. We simply need more Medicare–for people of all ages.

    Official Internet Data Office (4fbbd2)

  23. Ah, now the health insurance companies are parasites … great, they’ll go up against the wall with the Kulaks in the Obama paradise.

    SPQR (72771e)

  24. I don’t mean they’re parasites in the Soviet sense, but that they are part of the Finance/Insurance/Real Estate sector of the economy, which produces–well, what is it that they produce, again?

    Official Internet Data Office (4fbbd2)

  25. They don’t “produce” anything, but that’s increasingly true in a service economy. When they work, they provide the lube for capital formation, etc.

    Karl (f07e38)

  26. They provided the lubrication for capital formation. . .until they they wilfully mispriced risk in order to earn a bigger bonus, which caused their firms to become insolvent, and then forced them to go begging to Henry Paulson and Tim Geithner for bailout money. That’s not capitalism–that’s Ponzi finance. They are also parasites in the sense that they’re sucking the blood of the taxpayer for their stinking bailouts.

    Official Internet Data Office (4fbbd2)

  27. OIDO – You are speaking in an incredibly broad brush. Feel free to go without insurance if it is such an evil part of the economy. Not all insurance companies act in the manner in which you decry, and the ones you decry are bad actors, not indicative of systemic flaws.

    JD (20b35d)

  28. OIDO, #27, you’ll have to be more exact with reference to blood sucking parasites since GM is also sucking blood of taxpayers to bailout the UAW.

    SPQR (72771e)

  29. Plus, virtually all health insurance is controlled by State Agencies and the Legislatures that create them.
    If you are unhappy with the costs of health insurance, look to your state’s demands as to what insurance co’s must include in their coverage – that is where the real cost-containment can be attained.
    In many states, coverage is mandated to be a Rolls-Royce, when a large part of the health insurance purchasing public would be satisfied with a Chevrolet, or even a Hyundai.

    AD - RtR/OS (e50e17)

  30. I don’t think it’s wise to go without health insurance, but I wouldn’t care if the private firms were replaced by a single-payer. Under that plan, most people would have more money left over to spend at the end of the month, not less. If you know of a health insurance company which does not “act in the manner in which you decry,” I’d like to hear about it.

    Official Internet Data Office (4fbbd2)

  31. They provided the lubrication for capital formation. . .until they they wilfully mispriced risk in order to earn a bigger bonus, which caused their firms to become insolvent, and then forced them to go begging to Henry Paulson and Tim Geithner for bailout money. That’s not capitalism–that’s Ponzi finance. They are also parasites in the sense that they’re sucking the blood of the taxpayer for their stinking bailouts.

    This is what you said. You did not say anything about health insurance only. And in fact, you referenced companies that are not health insurance companies. Now, you change to only wish to discuss health insurance companies. Do you have any evidence that health insurance companies are engaged in the actions that you decry?

    JD (20b35d)

  32. My issue with private health insurance companies is just that I can’t stand dealing with them. And, no, my current carrier didn’t get a direct bailout.

    In the quote you saved, I was referring generally to AIG and the other members of the finance/insurance/real estate sector who got bailouts.

    Official Internet Data Office (4fbbd2)

  33. OIDO 3:58 who got bailouts.

    They didn’t ‘get’ bailouts. Bailouts were formulated by government actors and either imposed on or granted to large companies, some insolvent, some not.

    In other words, for the market to fail to reject bad actors, there must be intervention by the government.

    Apogee (f4320c)

  34. The Federal government is a villain for offering bailouts, and certain private companies are villains for taking them.

    Official Internet Data Office (4fbbd2)

  35. OIDO,

    Again, in some cases. But Paulson forced most of the big banks to take TARP money, whether they wanted it or not. Which is why you’re now seeing them trying to pay it off, and the gov’t refusing.

    Karl (3bf5f8)

  36. What a lot of people don’t understand is that there is no such thing as health insurance anymore. At one time, health insurance was written like life insurance. You could predict, for example, the number of heart attacks requiring hospitalization in 10,000 50-year-old white males. The insurance companies could take a package of such diagnoses, eliminate items that could not be predicted by actuaries, like pregnancy because it is voluntary, and write a premium structure.

    About 1965, that system broke down. Many people wanted to have routine procedures, like barium enemas, for example, paid for by the insurance company. So they convinced their doctors to hospitalize them to have the procedure. If they were in the hospital in the time, it was covered and, besides, the prep is a lot easier if the hospital does it.

    The insurance companies made a catastrophic mistake around the same time. They got tired of paying $150 per day for hospital stays and began to require the hospital to document every charge. Now, hospitals had no idea where their money went so they started to make up stuff. Ever since Blue Cross was started in 1929, the hospital got paid by adding up their costs and dividing by the number Blue Cross admission days per year. How the money was allocated among different patients and diagnoses was very vague. They knew, for example, that the ER and OB were money losers but they figured they were needed because somebody had to do it and besides, it was good marketing. If a woman had her baby in the hospital, or her husband got his cut sewn up in the ER, they were likely to come back when they needed some elective procedure like a hernia repair.

    They also had to figure out what it cost to provide 24 hour, 7 day service. This was not a issue until the insurance companies started to demand itemized bills for each admission. Then, they had to start allocating those costs and you ended up with 10 dollar aspirin tablets. The amazing thing was that the insurance companies paid those crazy bills. The accountants were satisfied and they could always raise premiums.

    Thirty years later, we have a system that still doesn’t know its costs. Insurance stopped being insurance back about 1970 when the payouts equaled premium income and the whole concept of investment of premium and “the principal of insurance” went out the window. Insurance companies have been “administrative service organizations” for 35 years. They administer the monthly payment of benefits and collect the money from the employer.

    The states have gotten involved and mandated a lot of benefits that cannot be justified by science. Then, in order to compete with HMOs, they began to pay for routine care, like OB and well baby care. My younger son was born in 1969. There was no insurance for childbirth at that time (except for c-section which led to a increase in c-sections) and the bill for mother and baby for three days plus labor and delivery was about $275. My next child was born in 1980 and I can’t remember the amount but it was covered by now and I’m sure it was more than 10 times the cost.

    Anyway, the topic is complicated but you can be sure that it is not insurance. In a national plan, the insurance companies could function as they do in Medicare and as they do in France. They provide the “gap” coverage and that would be a very good way for them to function. The single payer plan pays for basic coverage and the subscriber can opt to pay for more if desired. I fear that Obama is so opposed to individual initiative, like the Canadians were, that this would be banned. It is the biggest flaw in the Canadian plan.

    Mike K (8df289)

  37. Indeed:

    About 1965, that system broke down.

    Karl (3bf5f8)

  38. The irony is that energy costs may hit an all time low with alternative sources but with more people unemployed no one can afford the lower rate anyway.

    voiceofreason2 (4d5de2)

  39. Indeed, just take a trip to Canada and ask anyone about the state of their awesome health care system – I used to get quite tired of all the boasting when I first started vacationing there about 20 years ago, but then it started to tail off, to the point where almost every citizen has crossed the border to have medical procedures performed and/or know someone who has.

    Dmac (1ddf7e)

  40. Say, anybody else remember what happened in 1965?
    I’ll give you a hint: It starts with an “M”.

    AD - RtR/OS (e50e17)

  41. Sorry Karl, didn’t take your link till after my 7:01.

    AD - RtR/OS (e50e17)

  42. Medicare wasn’t actually the problem. Early on, it was well funded and solved some problems for the elderly. In 1964, there were lots of old ladies getting their hip fractures pinned at County. I did some myself. In late 1965, they were all gone from County. One problem is that mills were set up, especially for Medicaid. Another is that funding never kept up with consumption and the original mechanism to hold down consumption, the 20% co-pay, quickly was negated by Medi-gap insurance. Plus, “Usual, Customary and Reasonable fees” quickly became inflated.

    Anybody who is really interested should read The Social Transformation of American Medicine. Paul Starr was a lefty but he has the history right. It was written in 1986 and some of his ideas on solutions have been discredited but it is essential in understanding what happened.

    The other bit of data is the fact that 56% of British members of the NHS say it is so bad that it should be scrapped and they should start over. The doctors are even more pessimistic.

    Mike K (2cf494)

  43. I used to contribute (and participate in) to groups like The Nature Conservancy and The Sierra Club. But as the 90’s progressed, it became clear that their goals had been hijacked drastically

    Environmentalism in today’s era (versus decades ago, when Midwestern urban rivers were known to catch on fire) — in which certain experts now deem carbon dioxide to be a big pollutant — is sort of similar to civil rights and affirmative action in 2009 (versus 50 years ago when seats on buses were reserved based on a passenger’s race)—in which a non-white guy is occupying the Oval Office, and a non-Caucasian family calls the White House home.

    I was arguing with someone several weeks ago about how neurotic environmentalism in the 21st Century had become. A belief in the deity of Mother Green Earth now triggering fervor in its adherents no less religious than what’s associated with conventional religions. A fervor dependent on faith as much as, or actually even more than, on basic scientific wisdom.

    Truly absurd when the perrson I was speaking with, who has been employed in the auto industry for over 20 years, and is not an Al-Gore limousine liberal, nonetheless indicated he had fallen for all the Chicken-Little wailing about the horrors of global warming.

    I told him that if manmade carbon dioxide in today’s era is such a dangerous pollutant — and has such a powerful impact on planet Earth — he should consider one day walking outside around noontime and looking straight into the blazing sun, without the use of anything to protect his eyeballs, of course.

    Oh, I said, I guess there’s a huge source of non-manmade energy, which shines above us everyday of the year, that is so gargantuan, it could render us permanently blind quite quickly, quite easily!

    However, it may take the total collapse of the auto industry for someone like the person I was speaking with — who should have known better to begin with — to pause, mull the issue over, and think, damn, the environmental movement in the 21st Century truly has become a bastion of latte-drinking liberals!

    Mark (411533)

  44. Studies done in the 80’s show that Medicare’s bad influence on the health care industry was the great increase in demand for service that was prompted by not having to reach into your pocket to make payment.
    Where without Medicare, people with the sniffles would go to the drugstore and buy an antihistamine, now they would go to the Doctor’s office just to find out they needed a decongestant.
    It was the first step, and it’s been downhill ever since.

    AOracle (e50e17)

  45. […] growing list of which the Presidunce is flat out ignorant, economics, Robert J Samuelson, via Karl Patterico’s Pontifications: Since the dawn of the Industrial Age, this has been simple: produce more with less. […]

    Breakfast Scramble | BitsBlog (33ff78)

  46. […] There’s nothing like a trade war in the middle of a global economic contraction. Obamanomics: it’s like economics, but backwards. […]

    The Greenroom » Forum Archive » Green is the new Ponzi (e2f069)


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