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Obamacare To Combat The Recession? Obamacare Is a Formula for a Healthcare Recession--That Can Only Make The Overall Recession

Posted Oct 13 2009 10:05pm














Talk about chutzpah!

Barack Obama just said, in his Saturday radio address, that another reason we should pass his health care legislation is to combat the recession and reduce unemployment. Ah yes, our President, the expert on fighting recessions and reducing unemployment, now offering further economic advice.

Well, here's a flash: Obamacare, if it were to pass in anything like the form that the President and most Democrats want, would cause a recession in healthcare. A recession within a recession? Not promising for the overall economy!

As the AP put it in its lede:

As the unemployment rate climbs, President Barack Obama is trying to make the case that his health care overhaul would create jobs by making small business startups more affordable.

Evidently the specter of rising unemployment is starting to haunt the Obama administration--as, of course, it should. Despite relentless spinning by the MSM,">9.8 percent unemployment is terrible news. It would appear that Obama's Robert Rubin -ite economic policy isn't working very well--a policy that can be summed up as Bill Clinton -omics, minus the Internet boom. Which is to say, Clinton's policies weren't that good a decade ago, but they coincided with a once-in-a-generation techno-economic efflorescence, which pumped up the US economy during the late 90s. That was good luck for Clinton, but it explains why repeating those same Clintonite policies--and then some--will not produce similar results, absent the Internet boom/bubble.

And that's why the Obamans got the economy so wrong. They thought unemployment would peak at at less than 8 percent if their porky "stimulus" bill passed--they didn't notice that the light had changed. But today, in the real world, without the Internet boom to pick up the slack, unemployment is headed, even the Obamans now admit, to over 10 percent. (And, of course, Robert Rubin, the grand guru of taking credit for Moore's Law when he was Treasury Secretary, proved what he was really made of during the Citigroup debacle.)

And as I wrote for US News back in June, the problem that the Obamans face on healthcare is that they shot their wad, financially, on the Wall Street bailouts early in 2009. So by the time they got around to health care, the well had run dry, at least politically.

OK, so that's a poor platform, track-record-wise, for Obama to speak on the economy.

So how about the latest argument? In his radio talk, the 44th President said he had met people:

"Who've got a good idea and the expertise and determination to build it into a thriving business. But many can't take that leap because they can't afford to lose the health insurance they have at their current job."

OK, that's an argument, albeit not one backed up by much credibility from the speaker. And as Aristotle reminds us, effective rhetoric has three components: ethos, pathos, and logos. That is, respectively, character, emotion, and logic. The Greeks understood that the proponent of an argument can deploy all three rhetorical tools. But of those three, ethos, or character, was the most important. Why? Because in the long run, listeners must trust the person delivering the message. And as we have seen, on the issues of economic stewardship and unemployment, Obama hasn't done much to earn trust.

And so what about healthcare? Obviously I have had plenty to say about healthcare throughout the course of this blog, but here's one revealing Obama quote to focus on, in re: the connection between the healthcare sector of the economy and the overall economy. This is what Obama said about healthcare legislation he could support, in July:

And that's where my bottom lines will remain: Does this bill cover all Americans? Does it drive down costs both in the public sector and the private sector over the long-term?

Note the plural on "bottom lines." He is saying, very specifically, that he wants to "drive down" costs in both the public and the private sector. Which is to say, he wants to shrink both those healthcare sectors--isn't that the same thing as a recession? And of course, the tools to be used to achieve this cost-driving-down are the bluntest and crudest of instruments: rationing and price controls.

But critics of the current healthcare system, the one that Obama inherited--the folks who do the healtcare policy thinking for the administration--all say that America is spending too much on healthcare. Seventeen percent of GDP is too much, they declare. Their assertion has always struck me as more aesthetic than economic, and is therefore suspect, economically. So the rest of us might ask before we lambaste that 17 precent: What's the other 83 percent spent on? Is that other money all well spent? All of us have an opinion on the aesthetics of the overall economy, of course--what is a good spending priority and what is a bad spending priority. But most of us aren't in a position to turn our aesthetic judgments into policy.

And in fact, here at Serious Medicine Strategy, I have plenty of plenty of judgments about the current system: I think that we over-invest in trial lawyers, for example, and that we under-invest in cures. And I am prepared to make my argument--including the argument that over the long run, we can drive healthcare costs down by improving technology, just as we have driven down the price of cell phones and computers and just about everything else.

But my "medical industrial revolution" argument--calling for more innovation, not less--is totally different argument than the argument we hear from the Obamans, such as Peter Orszag, who argue that the key to controlling costs is to use less technology, and to slow the rate of techno-innovation. And, sadly, I am positive that Obama is echoing Orszag, not me, when he talks about "driving down" healthcare costs.

But as for myself, I would not try to argue, as Obama does, that shrinking the healthcare sector-- it's worth recalling that quote, above, in which the President calls for "driving down" costs in the healthcare sector --will in any way help the overall economy.

If the question is how to improve the quality of healthcare, price controls and rationing are not the answer. That's what the American people think, anyway, even if they can't always articulate their thoughts to the satisfaction of policy elites. So now the challenge is for the people to communicate their thinking to those elites.

And that's why we have elections.
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