Government Suppression of Productivity in the Health Industry

Consider the non-farm business productivity growth history according to the BLS:

In comparison, the 1 - 7 December 2012 issue of the Economist in an article called Fighting fit - Start-ups in health care, claims that the health care industry accounted for 18% of the American GDP in 2010 and for 20 years has had a negative labor productivity of -0.6%!  Why is this one huge sector of the American economy performing so miserably?  The answer is mostly or entirely because this industry is one of the most heavily regulated industries in America and because half of all medical bills are paid by government.

Let us have some fun with numbers.  The average labor productivity of the total non-farm private sector grew at an average rate of

[10(2.1%) + 7(2.5%) + 4(1.8%)]/21 = 2.2%

over the last 21 years.  In the last 20 years, 18% of this part of the economy a rate of -0.6% in labor productivity growth.  Without this single depression of our standard of living by government, the rest of the private sector labor productivity growth rate, r, over the last twenty years can be calculated from the equation:

2.2% = (0.82)r + (0.18)(-0.6%), so r = 2.8%.

The difference between an economy with a labor productivity rate growing at 2.2% compared to one growing at 2.8% is very significant over a generation.  It used to be that a generation was taken to be about 23 years, but that is no longer even close to the case.  A generation is equal to the average age of all mothers giving birth to children.  I have not found a good number for that in the U.S. as a whole.  The state of New Jersey says that the median age was 30.5 in 2004.  Median and average are not the same and NJ may not be entirely typical, but let us take the length of a generation to be 30 years for our purposes here.

During a generation of 30 years, the labor productivity at a growth rate of 2.2% a year has cummulatively become 1.92 times what it was at the start of that period.  But, with a labor productivity growth rate of 2.8% a year, the labor productivity is 2.29 times what it was at the end of the generation or more than 19% greater.  This also is a component causing health care costs to rise at much higher rates than do those of other sectors of our economy.

Yet the suppression of our standard of living of the last 20 years by the health industry due to government interference compared to what it could do if free is a small depression compared to what the game-changing ObamaCare or ObamaUncaringTax will do to the economy!  The story for the next 30 years will be quite miserable in terms of lost labor productivity and hence our standard of living.

Some Suggested Improvements to the U.S. Constitution

I would like to have seen the following changes made to the Constitution of the United States of America:

Add this sentence to the Preamble of the Constitution:

This Constitution defines the very limited and precisely enumerated powers of the federal government of the United States of America, whose primary purpose, shared with the states, is to protect and preserve the sovereign rights of the individual American citizen to life, liberty, property, and the pursuit of happiness.

Article 1, Section 8:

To regulate Commerce with foreign Nations and with the Indian Tribes and to ensure Free Trade and Commerce among the States.

Article 1, Section 9: 

No Tax or Duty shall be laid on Articles exported from any State and no Limitations upon the Production of Articles within a State shall be made.

Add:  With the exception of bankruptcy laws, no law shall be made impairing the obligation of contracts. [Applies to States, but not Congress now]

The Ninth Amendment should be understood to guarantee the exercise of the People of their right to work, earn a living, choose a profession, trade, property, privacy, sexual expression, civil union contracts, to be unbothered, to own their own bodies, to health care, and much more, all in the context of negative rights with no obligations imposed upon others, except the abstinence of initiated use of force.

The Tenth Amendment should be used vigorously to thwart encroachment of the federal government upon state governments with mandates and regulations imposed upon them for which the federal government was given no clearly enumerated power. Examples would be the regulation of health care beyond seeing that health insurance can be offered across state lines.  The federal government has no power to declare CO2 a pollutant, as another example, though states might do so, if it were, under their police power.

Add to the Sixteenth Amendment:   Income shall be taxed at a constant rate for all citizens of the United States of America.  No obligation shall be imposed to file tax reports, keep records, or make payments of taxes upon some citizens on behalf of other citizens or residents.

Repeal the Seventeenth Amendment, returning the selection of Senators to the legislature of the states.

The Real, Really High Unemployment Rate

The media has been happy to report to us that the unemployment rate in July 2009 was slightly improved to 9.4%, compared to a 9.5% rate in June. They also reported that the number of jobs lost was fewer than in most prior months. But this is an odd combination. For the real unemployment rate to drop, some number of net new jobs must be created, yet another 247,000 net jobs were lost in July. Some time ago, I remember that for the unemployment rate not to go up, 154,000 new net jobs had to be created in a month. So, the net number of new jobs appears to be about 401,000 jobs fewer than used to be needed to keep percent unemployed static.

Is this anything to crow about? Apparently it is not as bad as earlier in the year, but is it not awful nonetheless? Well apparently it is good if you are Obama and his Democrat Congress. It is improvement. Or maybe not. What if the recession long ago weeded out the worst employees and companies are simply reluctant to let their better employees go? And, what if the real unemployment rate is being very badly understated?

The unemployment rate does not count the underemployed or those who are involuntarily working fewer hours than they would like. It also does not count those "who have not searched for work in the last 4 weeks." In reality, no one really knows how many people want a job, but have not searched for it for 4 weeks. The government assumes that people who had been telling them they were searching for work while they were collecting unemployment benefits, but stopped doing so when their unemployment benefits ran out, are not searching for work. So they are not counted as unemployed. But, would you go down to an unemployment office looking for work for more than 26 weeks when they were not going to give you any money for doing so and when they had done nothing in 26 weeks to get you employed? Of course not. Thus, when things really get bad, the unemployment rate falls even when the number of really unemployed workers increases!

The number of people who were looking for work a while back, but have not done so recently, though they are still unemployed is estimated at 2.3 million. Adding them to the number in the official unemployment count at 9.4% unemployed, raises the real unemployment rate to 10.9%. So, Obama and the Democrat Congress now have a real unemployment rate of 10.9% and this rate is not going down!

Or, we could add in the 8.8 million workers who are on involuntary part time work. The total unemployed or underemployed would then be 16.6%. Nothing for the Democrats to crow about and hardly good evidence that the Stimulus Package is accomplishing much of anything.

In the 4th Quarter of 2008, the GDP shrank by 5.4%, in the 1st Quarter of 2009 by 6.4%, and in the 2nd Quarter of 2009 by 1.0%. Construction and manufacturing sectors have been hit very hard. They totaled 15% of jobs, but they account for 40% of the unemployment. 9.8% of adult men are unemployed, while 7.5% of adult women are unemployed. Asians are 8.3% unemployed, while whites are 8.6% unemployed, Hispanics are 12.3%, and blacks are 14.5% unemployed. All of these numbers are for the usual, under-reported statistics giving the 9.4% total unemployment rate.

Great job Obama. You really have been great at putting it to those terrible employers and wealthy investors. You scared the tar out of them even during the presidential campaign and with the known desire of the already Democrat Congress for increasing taxes and piling on regulations on businesses and investors, you made the recession worse long before you took office. Since then, your constant bad-mouthing and threats combined with those of the leadership of the House and Senate, has done a great job of keeping employers uncertain and scared. In such times, they are pulling themselves back into their shells. This is hardly surprising.

Guess what? It is all about being able to believe you will be allowed to make a reasonable profit, stupid! If you tell businessmen that they are going to taxed much more, but do not even tell them how they will be taxed, they cannot calculate whether a business operation can make money. If you tell them they will be more heavily regulated, but they do not know how they will be regulated, they cannot tell whether they can make money in those operations which may be restricted. If you tell them you will dictate management compensation, they do not know why they should bother to undertake new operations or even continue working hard on older operations. The value of the dollar is very uncertain, thanks to you. Increasing taxes and regulations are likely to make it harder for U.S. operations to make money relative to overseas operations. Besides, where will the energy come from for manufacturing and transportation and heating buildings in the U.S. with Waxman-Markey type carbon cap and trade? What on Earth are employee health insurance costs going to be when you have finished mandating many benefit additions?

It is unreasonable to expect employers and investors to hire workers under these circumstances. You must allow employers some reasonable level of certainty, but you, like FDR, love uncertainty, experimentation, and socialist redistribution and equalization. It is you who have given us 10.9% unemployment. Take credit for it and live up to it.

Eviscerating the Private Sector

The private sector is under total attack by government, the mainstream media, and socialists, who are now nearly everywhere in charge of educating our children by virtue of their control of the public schools, of colleges, arts and culture, and increasingly of religion. The attack is unremitting and the inroads toward total control of the economy are terrifyingly extensive. What has happened:

• It has been established in the courts that anything we may wish to sell, whether goods or services, is subject to regulation under the Interstate Commerce clause of the Constitution, despite its purpose being to free trade.
• The financial industry was heavily regulated, but now the winners are chosen by the federal government using bailout money, with those not being chosen being forced to merge by takeover with those who were chosen.
• The disposal of waste products is largely controlled by governments, with many areas having draconian recycling laws which make no economic sense.
• It has long been law that governments can prosecute a company for charging more for its goods and services than other companies do (proves monopoly), or for charging the same (proves collusion), or for charging less (proves cut-throat dumping). Woe be the company that angers government.
• Homes and commercial buildings cannot be built in most areas of the country without currying the favor of local and often state governments. When they are allowed to be built, they must often be built according to archaic, expensive building codes. Architectural designs must often be approved by conventional thinking local agencies. Often homes can only be built on very large lots, which means that it only makes sense to build large, expensive homes on those lots.
  
• The Clean Air Act gives the Environmental Protection Agency a very freely exercised power over power plants, manufacturing firms, and the user's of many products such as paints, aerosols, insecticides, and plastic foams.
• The Clean Water Act controls the use of water and the emissions or dumping of chemicals which may pollute water sources. It also means that low spots which are only very occasionally wet, cannot be used, since they are declared wetlands.
  
• Employers are required to hire some people and reject others, sometimes forcing them to adopt racist policies. They are required to serve as unpaid tax collectors and record keepers for governments and their employees. In some cases, they are required to confiscate the pay of their employees.
• People are required to subsidize many businesses through their tax monies. Examples of such businesses are those farmers who grow corn, rice, wheat, soybeans, peanuts, sugar, sugar beets, and many other crops; banks, especially those favored with bailout money; home mortgage holders, especially those in default who will soon be given bailout money; industries protected by tariffs, such as sugar growers, ethanol producers, steelmakers, and many more; power companies using wind-driven electric generators and solar power; companies granted monopolies by government such as cable companies, electric power companies, land-line telephone companies, gas stations on many toll roads, and others; and by companies and individuals given licenses for operation such as cab companies, plumbers, electricians, interior decorators, beauticians, real estate agents, certified public accountants, doctors, psychiatrists, dentists, EPA and FDA and state and local government accredited laboratories; those who purchase energy-efficient cars or who add insulation to their homes; those who send children to college on student loans; those who send children to public education schools; those small businesses who get subsidized loans from the Small Business Administration; those businesses owned by favored minorities and by women; businesses located in depressed zones; and many other activities favored by government.
• Redistribution of income using the progressive income tax, which moves money from those who create wealth and value to those who do not. This is an essential defining characteristic of socialism and has no basis in the American heritage prior to the New Deal in about 1937.
  
• Rare and unimportant species and the occasional hill or mountain take precedence over human needs for land or resources even in situations where the harm to the living species is unknown or minimal while the harm to humans of inaction is very clear and considerable.
• Businesses are required to keep expensive records of all transactions involving money, despite the fact that their only purpose is to be used as evidence against a firm that it is not paying some tax money some government wishes to take from entities with no voting privileges. The more government can tax business the happier it is, since voters care little and understand little about how these taxes have deleterious impact upon their lives. Businesses are required by Sarbanes-Oxley accounting requirements to use accounting procedures which make little economic sense.
  

What do we have to look forward to? Much more of the same. This includes:

• The declaration that the use of most energy forms produces polluting and climate-changing CO2, so our use of all the major forms of energy will be curtailed. This means much less economic activity since coal, oil, and natural gas use will be greatly reduced, despite the fact that this will do very little to reduce climate change, which is dominated by the forces of nature, not by those of man.
• Much more massive redistribution of income, with non-taxpayers receiving deceptively termed tax rebates from hard-working and creative thinkers who earn higher incomes.
• Slower economic growth caused by reduced use of energy, more expensive energy, less efficient investment of income due to government favored redirections, less total investment since lower income people invest less, an unwillingness to invest in longer term projects because of erratic and arbitrary government interferences such as changes of tax law and emission standards, the holding of investments for excessive periods to avoid paying higher capital gains taxes, shifting investment into government bonds, the increased commitment to expanding operations abroad where corporate taxes are lower, and creative and hardworking people working less.
• A great increase in required service to the government or to those charitable activities it may favor. Women will be required to register for the draft. More schools will require community slavery, err... service, before children are allowed to graduate from high school. College loans will be dependent upon signing up for service with the government, which will put many ignorant and untrained young people into the business of using government power, resources, and our tax money to do all sorts of mischief.
• Heavier dependence upon Social Security for retirement as stocks and securities either continue to shrink in value or grow much more slowly. As the economy grows more slowly, the tax income to support those on Social Security will diminish. Obama would give tax rebates to people who do not pay income tax, claiming that the rebate is really because they pay Social Security taxes. The distinction between income tax and Social Security tax will be completely lost. Since the Social Security money already collected has already been spent largely on non-Social Security programs by the federal government, that distinction was already very weak. In order to continue the Social Security program for Baby Boomers and beyond, the tax burden on the remaining workers will increase until they rebel, assuming that their vote is any longer able to take power away from the governments. Obama may choose to rule as his socialist hero Hugo Chavez does in Venezuela where the voters have little say.
• Freedom of speech will be everywhere as limited as it is now on most college campuses and in most public schools. Important issues will no longer be discussed, because if an issue is important, it has the power to make someone upset and it is not allowable to upset anyone, unless he is intelligent, hardworking, and a creative and rational thinker. The remaining pablum which we will be allowed to talk about will be the subject of radio talk show hosts chosen initially to have equal numbers of conservatives and socialists and very few libertarians under a Fairness Doctrine. After awhile, all libertarians and most conservatives will be banned, since it will be claimed that they are guilty of hate-speech and racism or that they are global-warming deniers.
• Human beings will be discouraged from procreating, since they are considered a threat to the planet and natural ecosystems. They cut down forests, build homes, use resources, and breathe out the greenhouse gas CO2. Humans will be considered inherently evil by most people rather than just the elitist environmental radicals of today and those young people recently rolled out of the propaganda mills called schools. Western Europe and Russia, where new births are far below replacement levels, will set the example in the U.S. where our population is damned for growing.
  
• Massive depression of the population will set in as they realize that they cannot do anything unless they get the approval of 25 government agencies, all of whom are fighting for power and have different, often contradictory, requirements. Many more people will turn to alcohol and drugs, as they do in Russia, to forget their helplessness and their total insignificance. Some, those who can remember the time, will dream of living a self-directed life.
• The United States of America will be as jaded as France and Germany. People will lose all sense of individuality. They will be defined only by what gender, race, and economic class they fall into. Employers will have the duty to provide jobs and will be thoroughly hated. More and more, government will attempt to chain them to their posts. Slavery will make a historical return with minorities and women as slave masters of so-called white males. Of course, this slavery will be directed through the agency of government, so that it will be easier for people to pretend that it is just required service. The slave masters will be many, rather than a single individual.
  

If we should fly with McCain, he will push us out of the plane with a deployed, but badly ripped parachute. If we fly with Obama, he will push us out of the plane in a free-fall without a parachute. We sure do have a lot to look forward to as we watch the ground come rapidly closer, before socialism gains its last death grip on us as we imprint the earth. Our deaths as individuals will be unlamented, but we will be damned for that last imprint we make upon the earth.