Tuesday, 12 September 2017 11:11

Hendrickson's View

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Hendrickson’s View

Mark W. Hendrickson

Mark W. Hendrickson is a faculty member, economist, and contributing scholar with the Center for Vision and Values at Grove City College, Grove City, Pennsylvania. These articles are from Forbes.com and Conservative Review.com, and Visionandvalues.org, a publication of Grove City College in Grove City, Pennsylvania.

Can Congress Fix Healthcare?

I’m experiencing cognitive dissonance as Republicans in Congress thrash about trying to find a politically acceptable way to (allegedly) “fix healthcare”; to find a viable way to reform the federal government’s role in healthcare. Looking back over the past 52 years, the lesson to be learned is that Uncle Sam can’t fix healthcare, but can disrupt it, cripple it, make it ever more expensive, and redistribute who has access to it when they most need it.

To me, the very notion that the federal government should be involved in healthcare or healthcare insurance is preposterous (as well as not authorized by the Constitution). If it were up to me, Congress wouldn’t be debating how to tweak federal involvement, but to abolish it. Before you ask, yes, I would be willing to forego every penny that the government has taxed me for Medicare (yet another broke federal program) over the past forty-some years if only we could get the government out of that most private of spheres, namely, our health.

Obviously, that isn’t going to happen. The question then becomes: Can Republicans in Congress agree on how to undo some of the damage already done by prior federal interventions, most egregiously, the Affordable Care Act? The difficulty was encapsulated in a headline some weeks ago in The Wall Street Journal. It asked whether Republican proposals would be producing (or be perceived as producing) more winners or losers. Once the notion is accepted that the government should help citizens provide for their healthcare needs, any proposal that would reduce (perceived) benefits already granted will be seen, with some justification, as an injustice. What is “fair” about a government helping some but hurting others in their decisions about who gets what? Lots of luck getting that to fly.

There is another problem with trying to scale back government involvement layer by layer. It’s a little bit like trying to ease into a pool of icy water inch by inch. Each small step causes so much discomfort that the project is abandoned. The only way to do it is to dive in headfirst and take all the pain at once. Any attempts by Republicans to roll back, much less dismantle, the gargantuan federal network of bureaucracies and regulations impacting healthcare runs the risk of a backlash that would return control of Congress to the opposition.

Frankly, given the dynamics of democratic (small “d”) politics, it seems most likely to me that, regardless of short-term hard-fought victories in the attempt to scale back the federal government’s involvement in healthcare, the outcome will be the systemic collapse of an overburdened, over-regulated, bankrupt healthcare system. Democrats, of course, are completely united in opposition to any and all attempts to shrink the federal footprint in healthcare. I outlined their strategy nearly a decade ago. Their goal is to centralize control over key parts — the “commanding heights” — of our economy in Washington. That objective is accomplished by precipitating a crisis or collapse that causes scared Americans to plead for the government to rescue them from the government-manufactured chaos. All they have to do is wait until scared Americans call for a paternalistic government to take care of them.

Despite my pessimistic long-term outlook, I hope Congress is able to start removing bricks from the federal healthcare wall that has been erected over the decades. It will be interesting to see if the GOP can agree on which bricks and how many to remove this year. How tragic (yet politically understandable, given the different dynamics of the voters in different congressional districts) it may be if all Republicans want are some incremental improvements (i.e., rollbacks of different harmful policies currently in place) but we end up stuck in the horrible status quo because they won’t agree on which incremental rollbacks to make. To use the exceedingly platitudinous metaphor, “Rome wasn’t built in a day,” nor can it be dismantled in a day. Will Republicans even get started on the formidable task facing them?

Stay tuned; we’ll find out soon.

Low Unemployment Is Not Economically Dangerous

The June 5 issue of The Wall Street Journal included an article entitled “Other Times Unemployment Has Been This Low, It Didn’t End Well.” It raised the question as to whether we should begin to worry that we are on the threshold of a painful economic comeuppance now that the headline May unemployment rate has fallen to only 4.3 percent. The short answer: Not at all. That isn’t to say that there is no possibility of a serious economic downturn, but if such unpleasantness arises, it won’t be because of a low unemployment rate.

The question occurred to the writer, Josh Zumbrun, because the only three times in the past five decades when official unemployment was this low were followed by “serious economic trouble.” Specifically:

“Low unemployment of the late 1960s preceded an inflation spiral in the 1970s. The late 1990s bred the Dot-com bubble and bust. The mid-2000s saw the buildup and collapse of U.S. housing.”

Let’s identify the causes of those jarring economic episodes. A proper diagnosis can help us avoid quack remedies.

The seeds of the inflationary spiral of the 1970s were sown by Lyndon Johnson’s “guns and butter” policy — i.e., increasing federal spending to wage a war on poverty and a military war in Vietnam concurrently — thereby undermining confidence in the dollar. Eventually, LBJ’s successor, Richard Nixon, who continued LBJ’s excessive spending, felt compelled to take the dollar off the gold standard, thereby unleashing the inflationary whirlwind of dollar depreciation that plagued the 1970s.

The dot.com bubble was the culmination of the giddy 1990s. Communism had collapsed, welfare reform was putting people back to work, creating more wealth, new technologies and businesses were emerging, and economic growth was vibrant in many foreign countries. Optimism reined. Most significantly in regard to the bubble, the financial powers that be — the Federal Reserve under Alan Greenspan, the U.S. Treasury, and the International Monetary Fund — intervened in financial markets every time a potentially unsettling event was brewing. There were bailouts of Mexico, South Korea, Russia, and Brazil. Intervention contained the potential fallout from Long Term Capital Management’s catastrophic losses. Investors believed they were insulated from bear markets by the notorious “Greenspan put.” However, the bear always gets his turn and all bubbles eventually burst, but the cause of the spectacular dot.com crash was not low unemployment, but massive financial intervention.

The housing bubble of the 2000s was a direct result of the ill-conceived bipartisan policy of government planners trying to increase the percentage of Americans who owned their own homes. Regulators at the Fed and Housing and Urban Development leaned on financial institutions to weaken, if not ignore, prudent credit standards; furthermore the Fed held interest rates low for so long that people were given adjustable-rate mortgages for high-priced houses that they could afford only as long as interest rates remained suppressed. And amateur home “flippers” took on leverage that eventually caught up with them.

The article depicted those economic shocks superimposed on a timeline showing low unemployment immediately preceding them. To the credit of Mr. Zumbrun, or his editors, the graph bore the heading “Omen or Coincidence?” — thereby allowing for the truth that concurrence alone does not establish causation. The fact is, as we have seen, that the three economic shocks preceded by a low unemployment rate had causes other than low unemployment. What, then, is the source of the speculative notion that low unemployment might have the power to cause economic upheaval?

Here we encounter the ghost of the Phillips Curve. Zumbrun writes, “Economic theory draws clear linkages between low unemployment and inflation.” The sentence is technically correct. Economist A. W. Phillips hypothesized such a linkage in 1958, and the eponymous “curve” became part of Keynesian orthodoxy. However, a more accurate wording by Zumbrum would have been, “Defunct economic theory.” The painful “stagflation” episode of the 1970s exploded the Phillips Curve dogma.

It’s well past time to give the Phillips curve a decent burial and move on from the silly notion that low unemployment is bad for a society’s economic health. Workers of America, relax! You’re innocent — inflation and bubbles aren’t your fault.

1967 and “The Summer of Love”: A Half-Century Later

For the baby-boomer generation (or at least the counterculture segment within it) the summer of 1967 became known as “The Summer of Love.”

Actually, most of us boomers never experienced it. Certainly, 1967 wasn’t a blissful, carefree summer of love for the hundreds of thousands of Americans serving in Vietnam.

It didn’t feel much like love in my hometown of Detroit either. Fifty years ago this week, on July 23, 1967 (a Sunday, as it is this year), deadly riots erupted in the Motor City. They lasted through Friday, July 28, when, with help from the National Guard (including Detroit Tigers’ second baseman Dick McAuliffe), the mayhem expired. During that week, my friend Rick was scheduled to lay down some violin tracks at a music studio downtown. His dad asked me to accompany them to the inner city. When we knocked on the door of the studio, an unsmiling middle-aged African-American man looked at three nervous white guys and drily told us that they weren’t going to set anyone on fire that evening.

The actual Summer of Love took place in the Haight-Ashbury neighborhood of San Francisco. It had become a spontaneous hedonistic Mecca for 100,000 hippies. A “summer of drugs, sex, and rock’n’roll” would have been a more accurate description. Showing the proverbial power of the pen, writers managed to glamorize and mythologize a prolonged session of debauched self-indulgence. They portrayed hormonally charged young people taking the path of least resistance and luxuriating in sensual pleasures as something supposedly idealistic—loftier and nobler than the war in Vietnam and the economic struggle for the supposedly “almighty” dollar. The counterculture embraced the Summer of Love as its nirvana.

Whatever thrills the hippies at Haight-Ashbury might have had then, the legacy of the summer of ’67 is far from glorious. Drugs, sex, and rock’n’roll is hardly a formula for generational excellence. Think of “the greatest generation” that found the inner strength and character to prevail in the existential conflict of World War II: Would they have achieved such heroic heights had their priorities been to tune out the world and pursue ease and pleasure? Not a chance.

The Summer of Love romanticized unromantic sexual liaisons. Casual sex “liberated” men and women from commitment. It turned the life-affirming act of procreation into a life-cheapening pastime of recreation.

I’m sure many baby-boomers smile at the recollection of youthful flings in those days, but there was a dark side to unleashing the human libido. Millions of American families have fractured as a result of a man’s, or woman’s, addiction to the intense but transitory thrills of sexual pursuits. In doing so, they have inflicted incalculable emotional damage on millions of innocent children. Millions more children were never even born, because baby-boomers didn’t want their pleasure-seeking lifestyles to be hampered by such weighty responsibilities.

Drugs? The tragedy of lives blunted and sometimes prematurely ended by drug usage has grown since the Summer of Love. You can supply your own statistics, anecdotes, and headlines. For me, the bottom-line issue is: How did our society get so spiritually anemic that millions of our compatriots still fall for the wicked illusion that happiness can be bought, then ingested, inhaled, or injected?

Rock’n’roll? Here I’m ambivalent. 1967 was a fertile year for exciting, creative music — ranging from the Beatles’ “Sgt. Pepper’s” album to the beguiling West Coast sound of The Doors and Jefferson Airplane. The music was great, but it often wasn’t innocent. The Doors evoked oedipal imagery. My wife loved the Airplane’s “White Rabbit,” not realizing until I explained to her in the ’80s that it was a drug song. The Grass Roots’ captured the essence of the Summer of Love with their paean to immaturity and irresponsibility, Let’s Live For Today:

“By chasing after money

And dreams that can’t come true

I’m glad that we are different

We’ve better things to do

May others plan their future

I’m busy loving you. . . ”

 

The bottom line on the rock’n’roll aspect of the Summer of Love: Sonically enchanting tunes conveyed distinctly countercultural messages into many pliable minds.

If you are old enough to remember the Summer of Love, I hope you emerged unscathed and have happy memories of it. If you are younger, you didn’t miss anything except some fantastic music, and you didn’t really miss that, because it’s available today. As for real genuine love — not the hollow Summer of Love counterfeit — it dwells within you (see Luke 17:21).     *

Read 215 times Last modified on Tuesday, 12 September 2017 11:14
Mark Hendrickson

Mark W. Hendrickson is a faculty member, economist, and contributing scholar with the Center for Vision and Values at Grove City College, Grove City, Pennsylvania. These articles are from V & V, a web site of the Center for Vision & Value, and Forbes.com.

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