However, one must understand that when a political operative or a member of Congress or a party official makes a hardcore partisan statement, one always considers the source. In fact, we are willing to accept some of the flackdom that accompanies politics and even consider it to be a form of perverse entertainment.
When Krugman makes a statement, however, he is not simply a hired gun by the Democratic Party. No, he is making that statement by the authority of being Paul Krugman, Ph.D. from MIT, faculty member at prestigious Princeton, and, of course, the 2008 winner of the Nobel award in economics. Yet, his column today, for all its supposed appeal to the "authority" of the Congressional Budget Office, is nothing but hackdom that demonstrates not only his outright partisanship, but demonstrates a woeful lack of simple economic knowledge. In other words, I am saying the guy is a fraud. A fraud.
With that out of the way, let us go to the column. Here are his opening jabs:
...what was nonetheless revealing about the meeting was the fact that Republicans — who had weeks to prepare for this particular event, and have been campaigning against reform for a year — didn’t bother making a case that could withstand even minimal fact-checking.Before dealing with the particulars of this one, let me say that Krugman conveniently forgot to deal with the ultimate howler said at the meeting, a statement by Nancy Pelosi that does not even need fact-checking because it is idiotic on its face. Pelosi claimed that if the Democrats ram through this bill, that it will ultimately "create four millions jobs" and will "create 400,000 jobs" almost immediate.
It was obvious how things would go as soon as the first Republican speaker, Senator Lamar Alexander, delivered his remarks. He was presumably chosen because he’s folksy and likable and could make his party’s position sound reasonable. But right off the bat he delivered a whopper, asserting that under the Democratic plan, “for millions of Americans, premiums will go up.”
Wow. I guess you could say that he wasn’t technically lying, since the Congressional Budget Office analysis of the Senate Democrats’ plan does say that average payments for insurance would go up. But it also makes it clear that this would happen only because people would buy more and better coverage. The “price of a given amount of insurance coverage” would fall, not rise — and the actual cost to many Americans would fall sharply thanks to federal aid.
Don't take my word for it. Click on the link and you will see Pelosi making the declaration. If anything, this bill will destroy wealth and ultimately the jobs that are needed to create wealth.
Now that Pelosi's rant is out of the way, let us go back to Krugman's statements. Indeed, let me zero in on this one: The “price of a given amount of insurance coverage” would fall, not rise — and the actual cost to many Americans would fall sharply thanks to federal aid.
You see, in Paul Krugman's world there exists no opportunity cost. That is right. Krugman is saying that if government subsidizes the payment for health insurance premiums, opportunity cost disappears! Given that in his book, The Return of Depression Economics, he claims that printing money during a recession creates what he calls a "free lunch," which is a way of saying that printing money actually creates new wealth.
I'm sorry, folks. When an economist denies the presence of opportunity cost, it is time to fold the tents and leave. Opportunity cost is the central building block of economic analysis. In fact, if there is no scarcity and no opportunity cost, there is no economics. So, to have an economist -- and a highly-decorated one at that -- declare that subsidies lower real costs it absolutely shocking. Krugman basically is telling readers that government -- or at least government run by the Democratic Party -- can perform magic by creating wealth out of nothing but printed money. This ain't econ, people, it is metaphysics.
Unfortunately, we have to keep in mind that there is no way that we can have the following things and STILL cut real medical costs:
1. Mandates for insurers,
2. Prohibitions on denying insurance for people with pre-existing conditions,
3. Massive subsidies to pay the premiums.
That is a prescription for forcing up real costs, and for those who really believe otherwise, I give you another American institution for which we have seen the same pattern in which third-party payments have forced up costs: higher education.
We have seen tuition and fees for U.S. colleges and universities, both public and private, rise faster than the Consumer Price Index for many years. Why? Much of the payment for college and graduate school is made either through debt (and many people today graduate from all levels of higher education with massive amounts of personal debt) or through direct government payments. Furthermore, government imposes a large number of expensive administrative mandates (Sound familiar?) on colleges and universities. And then we are shocked, SHOCKED that tuition and fees are soaring?
Assume that the government (1) required colleges and universities to admit all applicants, regardless of their academic records (and no place could discriminate, including Krugman's own Princeton University); (2) if someone could not afford the tuition and fees, the government would pay the balance or pay for all of it, and (3) all Americans would be required to go to college.
Does any reader think we would have anything but chaos? Yet, there is qualitatively no difference between my "modest proposal" above and what Krugman and the Democrats are pushing. None.
Now it is one thing to say that the Republicans, intellectually speaking, are running on empty. That is nothing new, and they have been low on gas for more than a decade. It is another things, however, then a Republican brings up an issue of opportunity cost and is called a liar by a Nobel-Prize-winning economist. At that point, Paul Krugman no longer is an economist; he is just another political operative.