The New Thing: Economic Reality, 6/17
Punctured illusions
The precipitating event of the free-lunch era was the massive 2009 federal response to the Great Recession. At the time, an $800 billion stimulus bill and $1.3 trillion expansion of the Federal Reserve balance sheet represented a radical (and to many, reckless) divergence from Washington’s typical modest recession responses. And yet the warnings of rampant inflation, spiraling interest rates, and a fiscal crisis did not come to pass. In fact, inflation remained low, and interest rates continued to fall for a decade. The sluggish economic recovery convinced many economists that even this atypically bold response was ultimately too mild.
I am one of those who was surprised that we got away with as much deficit spending as we did from 2009 through 2020. While a bipartisan consensus supported President Trump’s economic response to the virus, I wrote that Lockdown Socialism will Collapse. While real economic activity was shut down, the government created trillions of dollars of new paper wealth.
Now we are paying the price. But reality is just beginning to sink in. Everyone over the age of 50 expects to receive promised benefits from Social Security and Medicare. But nobody expects to have to pay the extra taxes needed to support those programs. We still have that reckoning ahead of us.
One can sense a mood shift taking place in America. The experiment with radical progressive ideas on the economy, race, gender, schooling, and crime may have run its course.
I would like to hope that people's taste for the hard left experiment has turned bitter, too. What worries me is that people become embittered at one or two aspects of it only, and think the rest is just fine. If those one or two aspects differ by person it is quite possible that the shift won't be enough to break up the coalition, just shake up the low n-issue voters. I am not sure how much of the left sees the common threads in the progressive left's philosophy of governance.
There is hope, although it is similar to the hope of destroying a Death Star by dropping a torpedo down its exhaust pipe.
The entire American health care complex is fubar. It is not just terribly expensive. It is inconceivably illogical and irrational. Do you know the list price of a spending 30 minutes in a health care facility in order for a health care specialist to spend 10 minutes in your presence and then to offer an opinion? In Maryland the sticker price is $400. Sure, after adjustments and insurance coverage the consumer price drops to $200.
That is insane. This cannot last. And it won't.
So predictions that Medicare is unsustainable assume nothing changes. There will be change for the simple reason the current trend is unsustainable. I predict the next dozen years will see massive change to how health care is provided, how it is priced and how it is paid.
What gives me hope is 40 years ago the financial industry was a monopoly. It was expensive and highly regulated. Today anyone with a laptop and some technical knowledge and run their own hedge fund. The world changes. It changed for the financial industry. It will change for health care.