Socialized Healthcare vs. the Laws of Economics by Thomas J. DiLorenzo

The government's initial step in attempting to create a government-run healthcare monopoly has been to propose a law that would eventually drive the private health insurance industry out of existence. Additional taxes and mandated costs are to be imposed on health insurance companies, while a government-run "health insurance" bureaucracy will be created, ostensibly to "compete" with the private companies. The hoped-for end result is one big government monopoly which, like all government monopolies, will operate with all the efficiency of the post office and all the charm and compassion of the IRS.

Of course, it would be difficult to compete with a rival who has all of his capital and operating costs paid out of tax dollars. Whenever government "competes" with the private sector, it makes sure that the competition is grossly unfair, piling costly regulation after regulation, and tax after tax on the private companies while exempting itself from all of them. This is why the "government-sponsored enterprises" Fannie Mae and Freddie Mac were so profitable for so many years. It is also why so many abysmally performing "public" schools remain in existence for decades despite their utter failure at educating children.

America's Healthcare Future?

Some years ago, the Nobel-laureate economist Milton Friedman studied the history of healthcare supply in America. In a 1992 study published by the Hoover Institution, entitled "Input and Output in Health Care," Friedman noted that 56 percent of all hospitals in America were privately owned and for-profit in 1910. After 60 years of subsidies for government-run hospitals, the number had fallen to about 10 percent. It took decades, but by the early 1990s government had taken over almost the entire hospital industry. That small portion of the industry that remains for-profit is regulated in an extraordinarily heavy way by federal, state and local governments so that many (perhaps most) of the decisions made by hospital administrators have to do with regulatory compliance as opposed to patient/customer service in pursuit of profit. It is profit, of course, that is necessary for private-sector hospitals to have the wherewithal to pay for healthcare.

Friedman's key conclusion was that, as with all governmental bureaucratic systems, government-owned or -controlled healthcare created a situation whereby increased "inputs," such as expenditures on equipment, infrastructure, and the salaries of medical professionals, actually led to decreased "outputs" in terms of the quantity of medical care. For example, while medical expenditures rose by 224 percent from 1965–1989, the number of hospital beds per 1,000 population fell by 44 percent and the number of beds occupied declined by 15 percent. Also during this time of almost complete governmental domination of the hospital industry (1944–1989), costs per patient-day rose almost 24-fold after inflation is taken into account.

The more money that has been spent on government-run healthcare, the less healthcare we have gotten. This kind of result is generally true of all government bureaucracies because of the absence of any market feedback mechanism. Since there are no profits in an accounting sense, by definition, in government, there is no mechanism for rewarding good performance and penalizing bad performance. In fact, in all government enterprises, exactly the opposite is true: bad performance (failure to achieve ostensible goals, or satisfy "customers") is typically rewarded with larger budgets. Failure to educate children leads to more money for government schools. Failure to reduce poverty leads to larger budgets for welfare state bureaucracies. This is guaranteed to happen with healthcare socialism as well.

Costs always explode whenever the government gets involved, and governments always lie about it. In 1970 the government forecast that the hospital insurance (HI) portion of Medicare would be "only" $2.9 billion annually. Since the actual expenditures were $5.3 billion, this was a 79 percent underestimate of cost. In 1980 the government forecast $5.5 billion in HI expenditures; actual expenditures were more than four times that amount – $25.6 billion. This bureaucratic cost explosion led the government to enact 23 new taxes in the first 30 years of Medicare. (See Ron Hamoway, "The Genesis and Development of Medicare," in Roger Feldman, ed., American Health Care, Independent Institute, 2000, pp. 15–86). The Obama administration's claim that a government takeover of healthcare will somehow magically reduce costs is not to be taken seriously. Government never, ever, reduces the cost of doing anything.

All government-run healthcare monopolies, whether they are in Canada, the UK, or Cuba, experience an explosion of both cost and demand – since healthcare is "free." Socialized healthcare is not really free, of course; the true cost is merely hidden, since it is paid for by taxes.

Whenever anything has a zero explicit price associated with it, consumer demand will increase substantially, and healthcare is no exception. At the same time, bureaucratic bungling will guarantee gross inefficiencies that will get worse and worse each year. As costs get out of control and begin to embarrass those who have promised all Americans a free healthcare lunch, the politicians will do what all governments do and impose price controls, probably under some euphemism such as "global budget controls."

Price controls, or laws that force prices down below market-clearing levels (where supply and demand are coordinated), artificially stimulate the amount demanded by consumers while reducing supply by making it unprofitable to supply as much as previously. The result of increased demand and reduced supply is shortages. Non-price rationing becomes necessary. This means that government bureaucrats, not individuals and their doctors, inevitably determine who will get medical treatment and who will not, what kind of medical technology will be available, how many doctors there will be, and so forth.

All countries that have adopted socialized healthcare have suffered from the disease of price-control-induced shortages. If a Canadian, for instance, suffers third-degree burns in an automobile crash and is in need of reconstructive plastic surgery, the average waiting time for treatment is more than 19 weeks, or nearly five months. The waiting time for orthopaedic surgery is also almost five months; for neurosurgery it's three full months; and it is even more than a month for heart surgery (see The Fraser Institute publication, Waiting Your Turn: Hospital Waiting Lists in Canada). Think about that one: if your doctor discovers that your arteries are clogged, you must wait in line for more than a month, with death by heart attack an imminent possibility. That's why so many Canadians travel to the United States for healthcare.

All the major American newspapers seem to have become nothing more than cheerleaders for the Obama administration, so it is difficult to find much in the way of current stories about the debacle of nationalized healthcare in Canada. But if one goes back a few years, the information is much more plentiful. A January 16, 2000, New York Times article entitled "Full Hospitals Make Canadians Wait and Look South," by James Brooke, provided some good examples of how Canadian price controls have created serious shortage problems.

* A 58-year-old grandmother awaited open-heart surgery in a Montreal hospital hallway with 66 other patients as electric doors opened and closed all night long, bringing in drafts from sub-zero weather. She was on a five-year waiting list for her heart surgery.
* In Toronto, 23 of the city's 25 hospitals turned away ambulances in a single day because of a shortage of doctors.
* In Vancouver, ambulances have been "stacked up" for hours while heart attack victims wait in them before being properly taken care of.
* At least 1,000 Canadian doctors and many thousands of Canadian nurses have migrated to the United States to avoid price controls on their salaries.

Wrote Mr. Brooke, "Few Canadians would recommend their system as a model for export."

Canadian price-control-induced shortages also manifest themselves in scarce access to medical technology. Per capita, the United States has eight times more MRI machines, seven times more radiation therapy units for cancer treatment, six times more lithotripsy units, and three times more open-heart surgery units. There are more MRI scanners in Washington state, population five million, than in all of Canada, with a population of more than 30 million (See John Goodman and Gerald Musgrave, Patient Power).

In the UK as well – thanks to nationalization, price controls, and government rationing of healthcare – thousands of people die needlessly every year because of shortages of kidney dialysis machines, pediatric intensive care units, pacemakers, and even x-ray machines. This is America's future, if "ObamaCare" becomes a reality.

This article originally appeared on Mises.org.

Your Mortgage News Source Ron Paul: US Dollar Collapse When China Stops Buying Debt

In February of 2009 Ron Paul warned of a US Dollar collapse when China stops buying out debt in this video. There are many good points that Mr. Paul points out in the video but none were more prophetic then calling for the dollar bubble to burst. When the video was recorded the US Dollar index was around 86. Today the US Dollar Index is currently at 75.5.

Another ironic fact about this video is that shortly after this video was recorded President Obama went on 60 Minutes and made the statement that “the dollar is still strong.” Unfortunately the dollar was not strong and we have seen that as a 10% drop has happened since the president’s statement. For those of you wondering why the value of the dollar continues to decline it is truly supply and demand.

The Federal Reserve Bank continues to print money at will. The billions of dollars that have been created out of thin air because of the stimulus package are only decreasing the value of the dollar. Not only is the value of the dollar decreasing, the Federal Reserve Bank is causing people to do things that they normally would not do. With extremely low interest rates people are going to buy homes. There is no problem with people buying homes except that many of these home buyers cannot truly afford homes. For reference to this take a look at the subprime mortgage crisis.

Ron Paul has hope that things will get better though as many Americans are educating themselves to the situation at hand. The book End the Fed by Ron Paul remains on the Amazon.com Top 100 list when is encouraging. If we continue to do the research and better understand what is going on then we are more apt to make the changes necessary to avoid possible disaster.

Make sure to return to Subprime Blogger to get your Ron Paul news. We also write columns on Jim Rogers, Peter Schiff and Gerald Celente as these men have done a great job of pointing out some of the problems America faces. Each of these men correctly predicted the decline of the dollar and the subsequent commodity bull market. We will continue to keep you updated on the commodity bull market as well as commentary from these individuals. The columns are located in the Current News section with a link located below.

Current News

Author: Jesse Wojdylo

Massachusetts martial law bill on the swine flu H1N1

Here are some excerpts from the text of Massachusetts Senate Bill 2028:

119 Upon request or issuance of an order by the commissioner or his or her designee, or by a local
120 public health authority or its designee, an officer authorized to serve criminal process may arrest
121 without a warrant any person whom the officer has probable cause to believe has violated an
122 order given to effectuate the purposes of this subsection and shall use reasonable diligence to
123 enforce such order.
124 Any person who knowingly violates an order of the commissioner or his or her designee, or of a
125 local public health authority or its designee, given to effectuate the purposes of this subsection
shall be punished by imprisonment for not more than 6 months, or by
126 a fine of note more than
127 one thousand dollars, or both.


Read the text of the bill here: MA S. 2028

Still, nobody knows about the Hardin, MT jail.

Desperate times call for desperate measures. This is most likely the culprit in the situation now unfolding in Hardin, Montana. All across America, small towns are struggling to survive. Many rural areas have discovered the correctional industry as an easy fix for hard economic times. However, a look behind the scenes reveals that this small country town may have got more than it bargained for.


Private security firms like Wackenhut have been around for years and although they may have raised an eyebrow, no one thought too much of a private company overseeing the containment of prison inmates. After all, it provided jobs and nobody seems to be getting hurt.


Suspicion was aroused in Hardin when a number of Mercedes were spotted with an unfamiliar decal and the words "Hardin Police" prominently displayed. This along with the fact that the new correctional facility was abuzz with fresh activity prompted some questions. Problems began to arise when questions were asked and answers were not provided.

The facility had been under controversy since it had been built as a detention facility but did not meet the requirements for a correctional facility. Once the building was completed, Hardin officials were unable to secure a contract for the facility. Enter APF. Details remain sketchy about "American Police Force"; however, in an article in the Helenair newspaper, a source from APF revealed that his boss was retired U.S. Army colonel Richard Culver. Thanks to some investigative snooping by Ron Paul supporters from the DailyPaul.com, particularly "Liberty_Belle", on the connection between the American Police Force and Richard Culver, he is an executive with the security firm International SOS out of Trevose, PA. Culver is profiled in Portfolio.com's "Job of the Week" spotlight which states that in this particular job one could expect to earn between $100,000 to $350,000 annually. Not only does ISOS provide security services it touts itself as the world's largest "medical and security assistance company". In fact, it is keeping tabs on the swine flu pandemic and has its own "pandemic preparedness" page. Two items of note on this page under the topic "International SOS Capability" are "Medical Evacuation" and "RMR Capability".

Whether or not APF's duties were to extend beyond the detention facility is unclear. It is also unclear as to the relationship between APF and International SOS, other than sharing a security director. However, one disturbing fact regarding International SOS is that it is listed as a member of the International Peace Operations Association, which at one time provided an umbrella for Blackwater, and currently resides over Dyncorp as well as numerous other security and medical agencies. The IPOA's Wikipedia page defines the group as "created to support the burgeoning private military industry." For one, I am uncomfortable with the "burgeoning" of this particular industry, but maybe I have watched too many superhero movies lately.

What is disturbing in all of this is the growing trend which the government displays in "outsourcing" the fundamental responsibilities it has under the Constitution; namely, "to promote the general welfare, and to provide for the common defense". In a recent report, Moshe Schwartz, Specialist in Defense Acquisition, reported that the U.S. Department of Defense had 200,000 contractors and 194,000 military troops in Iraq and Afghanistan. He further states that,

DOD officials have stated that the military’s experience in Iraq and Afghanistan, coupled with Congressional attention and legislation, has focused DOD’s attention on the importance of contractors to operational success.

In other words, Congress is well aware that contractors now outnumber U.S. militiary forces in Iraq and Afghanistan. The use of civilian personnel during war raises numerous concerns. Not only the obvious concerns regarding logistics, discipline, safety and protocol, but concerns regarding the reporting of
casualties and overall progress of the campaign. The reported torture of Iraqi prisoners, for example, takes on a completely different focus with the introduction of mercenary groups.

Overseas activities are not the only areas of concern regarding these para-military organizations. During Katrina, Blackwater troops were used extensively and were placed in positions of having to disarm American citizens. What are the ramifications of a private, civilian army violating the first and second amendment rights of American citizens for the purpose of financial gain? Numerous officers during the recent protests at the G 20 summit in Pittsburgh were unable to be identified by insignia. Undoubtedly, they were contracted by a private agency such as International SOS.

Ron Paul has stated that government does provide a function which is defined by the Constitution. It is for this purpose that we collectively authorize the government. We do not give authorization with the understanding that these essential functions will be "outsourced", whether by a Democrat or Republican administration.

Update: Justin Elliott of TPMMuckraker reports that APF contracted the facility for purposes of training for law enforcement sniper operations and DNA testing.
Update II: AP reporter Matthew Brown reports APF "Captain" has checkered past, contract elaborate scam.

Video of Hardin jail

Hardin Jail...What the hell is this! Thought police?

http://www.cbsnews.com/blogs/2009/09/29/crimesider/entry5351491.shtml

American Police Force Corporation Takes Over Small Town Police Force and Prisoner-Less Jail

HARDIN, Mont. (CBS/AP) This is the strange story of how American Police Force, a little known company which claims to specialize in training military and security forces overseas, has seemingly taken control of a $27 million, never-used jail, and a rural Montana town's nonexistent police force.

After arriving in this tiny city with three Mercedes SUVs marked with the logo of a police department that has never existed, representatives of the obscure California security company said preparations were under way to take over Hardin's jail, which has no prisoners.

Significant obstacles remain - including a lack of any contracts to acquire prisoners from other jails or other states.

And on Friday came the revelation the company's operating agreement for the facility has yet to be validated - two weeks after city leaders first unveiled what they said was a signed agreement.

Still, some Hardin leaders said the deal to turn over the 464-bed jail remained on track.

The agreement with American Police Force has been heavily promoted by members of the city's economic development branch, the Two Rivers Authority. Authority Vice President Albert Peterson on Friday repeated his claim to be “100 percent” confident in the company.

The lead public figure for American Police Force, Michael Hilton, said more than 200 employees would be sought for the jail and a proposed military and law enforcement training center.

That would be a significant boost to Hardin, a struggling town of 3,500 located about 45 miles east of Billings. An earlier announcement that a job fair would be held during the last week never came to fruition.

The bonds used to pay for the jail have been in default since May, 2008.

Hilton also said he planned a helicopter tour of the region in coming days to look at real estate for a planned tactical military training ground. He said 5,000 to 10,000 acres were needed to complement the training center, a $17 million project.

But the company's flashy arrival this week stirred new questions. The logo on the black Mercedes SUVs said “City of Hardin Police Department.”

Yet the city has not had a police force of its own for 30 years.

“Pretty looking police car, ain't it?” Hardin resident Leroy Frickle, 67, said as he eyed one of the vehicles parked in front of a bed and breakfast where Hilton and other company representatives were staying. “The things you hear about this American Police, I don't know what to think.”

Hilton said the vehicles would be handed over to the city if it forms a police force of its own. The city is now under the jurisdiction of the Big Horn County Sheriff's Office.

After meeting briefly with Hilton on Friday, Mayor Ron Adams said he wanted the police logos removed.

“This helps, but it doesn't answer everything until the contract is signed,” Adams said. “Talk is cheap.”

Hilton said the company's arrival in Hardin would help allay such concerns. And he promised that on Feb. 1, 2010, Hardin would receive its first check under a deal said to be worth more than $2.6 million annually.

Little has been revealed to date about American Police Force. The company was incorporated in California in March, soon after Hardin's empty jail gained notoriety after city leaders suggested it could be used for the Guantanamo Bay terrorism detainees.

Members of Montana's congressional delegation say they have been closely monitoring the events in Hardin, but the city has largely been going it alone.

In the two years since the jail was built, city leaders have clashed repeatedly with the administration of Gov. Brian Schweitzer, who opposed efforts to bring in out-of-state prisoners.

After then-Attorney General Mike McGrath issued a 2007 opinion saying prisoners from other states were prohibited, Hardin successfully sued the state.

Despite the city's contention that the state has continued to foil its efforts to find prisoners, Montana Department of Corrections spokesman Bob Anez said his agency is no longer involved. “That's water under the bridge,” Anez said.

On Friday, American Police Force announced its first local hire: a reporter for the Billings Gazette, Becky Shay, who has covered events surrounding the jail since its construction. She will be the company's spokeswoman for $60,000 a year.

Shay said she intended to bring new transparency to the process, but declined to directly answer the first question posed to her: Where is American Police Force getting the money to operate the jail and build the training center?

“I know enough about where the money is coming from to be confident signing on with them,” she said.

Gazette Editor Steve Prosinski said he was first informed about Shay's decision to leave the paper on Friday. “We weren't aware that she was talking with them about employment,” he said.

Hilton said he also had a job discussion with Kerri Smith, wife of Two Rivers Authority Executive Director Greg Smith, who helped craft the deal to bring American Police Force to Hardin. Greg Smith was placed on unpaid leave two weeks ago for reasons that have not been explained.

Kerri Smith is one of two finalists in the city's mayoral race. Hilton said he asked her to call him about possible employment if she did not win the race.

Kerri Smith could not be reached immediately for comment. A message was left by The Associated Press at a theater owned by the Smith family. Her home number is unlisted.