Tuesday, November 24, 2009

A Meditation on Incentives

We've been hearing for years that "medicare is broke" and that the unfunded liabilities of this entitlement, and the Social Security system, are mind-boggling. These liabilities are promises to provide care and support for the elderly and the infirm. If this is true of these entitlements, it must also be true of state, municipal, and private systems that have made promises to the aging and the infirm: pensions and insurance companies.
When these claims began to surface, America was in the midst of a historical economic boom -- unemployment at historic lows, asset values at historic highs and increasing at historic rates. Assets, mind you, that are on the balance sheets of various pools of capital, including pension funds, insurance portfolios, etc.
Now, of course, the bubble has burst, asset values have been in a freefall for a year or more, unemployment is at near historic highs (for this is "the deepest recession since The Great Depression"). Pension assets have plummeted and we have plenty of reason to guess that insurance company assets have, too. The Pension Benefit Guaranty Corporation, another bit of moral hazard introduced by the Government to provide taxpayer bailouts to pensions that have been run into the ground, is said to be "on the brink..." History has shown that even private failures ultimately become government liabilities.
So, then, here we have the very real, actuarial problem of "unfunded liabilities." There is only one cure for this condition -- see to it that the liabilities are funded. And there are two ways to do this: increase funds or reduce liabilities. And the government has taken aggressive steps to do both. To increase funds, an all-out effort to create inflation has been undertaken, which would yield myriad taxing opportunities, if only the money would circulate. And to reduce the liabilities...
We said that the liabilities in question are the elderly and infirm. And from almost the moment of its inauguration, the Obama administration has been pushing with all its might by promotion, coercion, propaganda, and who knows what other means, a "healthcare bill" that has introduced into the lexicon of our age the concepts of "end of life counseling" and something called a "Complete Lives System" of healthcare allocation.
We've already begun to see -- in presumption of the passage of legislation giving the government this sweeping authority, despite the overwhelming objections of the American people -- the trumpeted release of "research" and "statistics" that prove, for example, that women really shouldn't bother with breast exams until they are fifty years old, rather than forty. It is chillingly obvious that this heavy-handed propaganda would lead to a larger number of deaths of women by breast cancer which would amount to...a reduction in the liabilities of the federal government.
So here we have an object lesson in how liabilities to the government can be reduced. And this monster isn't even law yet.
This is a meditation on incentives. We can see that the Government is "incentivized" to reduce its liabilities for its undeniably bankrupt entitlement programs and those it might ultimately have to bail out. It's right there in black and white. At a certain point, you're worth more dead than alive to your government. Giving it control over the delivery or payment of your healthcare is giving them that power. Underscoring the absurdity of the entire effort is the pretext of "fixing" these bottomless entitlements with...another entitlement ("free healthcare for all").
Not only do they regard you as worthless, they apparently regard you as stupid as well.

And you're OK with that?


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