Health Care Reform Lies

Here is the latest Dan Mitchell video on current economic headlines. In this video, he talks about how the government is using textbook fiscal policy theory to hoodwink the public.

The government is banking on the "broken clock" theory to convince the public their plans have a good chance of working - namely, "A broken clock is right two times a day." Similarly, economic theories will work in a textbook where only one or two controlled factors are accounted for in a graph. So the government is trying to convince the public that the chances are great that in their economic model bubbles that healthcare reform will perform on par with its intended goals.

What I can't comprehend is why anyone would believe this! Isn't this the same problem we saw happen in the subprime mortgage market? Didn't private enterprise reliance on economic models without concern for the real world outrage the public? Most people understand the failings of economic models in the subprime market, but why would they have such overwhelming faith in government economic and financial modeling?

Thankfully, there are economists who recognize the limitations of such models, and can predict the disastrous likely effects when those models are not treated invoking the ceteris paribus rule.

Mitchell explains three important issues:

• The new spending proposals will likely cost a lot more than anticipated. This should be obvious to anyone who has ever planned anything and came in far over budget - this is far more likely than being under budget, especially when it's someone else's money, namely the taxpayer. In fact, watch this Milton Friedman video on spending other people's money before you watch Dan's video, I think it will further clarify the issue.
• New taxes will not generate the revenue the government is anticipating (especially not in this recession!)
• Promises that spending will decrease or stay steady in the future are downright laughable. Can anyone name a social insurance program whose costs have decreased since inception?