Ken,
Thanks for sending me the really interesting Journal article(s). This is a longer response than a busy doctor has time to read, but it is what it is, as Clinton would say, or something like that. We'll have to talk about this more next time we get together.
Like Dr. Foy author of "Understanding the Healthcare bubble, Why it was inflated and why it must burst", I am a student and very firm believer in the Austrian School of economics. The business cycle theory of the Austrians is, as Dr. Foy points out, the only theory in economics that explains and predicts the booms and busts in the capitalist system. The Austrian's theory is also the antitheses of Keynes's theory, the favored model of interventionist politicians since Hoover and Roosevelt wreaked havoc with it on the American and world economies in the 1930's. In my opinion, all democrat politicians and probably somewhat over half the Republican politicians are Keynsians. Therein lies much of our problem with out-of-control government spending. If we followed the advise of the Austrians, we would eliminate government deficit spending and debt, restore the concept of sound money by eliminating fractional reserve banking and the FRS (Federal Reserve System), and shrink the size of government --the welfare and regulatory state -- by at least 50%, all of which would effectively empower the doers and producers, stimulate and energize the market economy. Failure to do just this, we can expect continuing booms and busts, inflation, deficit spending, shrinking middle class, growing dependency class and overall decline. Ludwig von Mises argued that this very economic scenario is exactly what destroyed the great Roman Empire and that the invading barbarians merely took over by force once the rot had done its job.
Dr. Foy did a brilliant job of relating the Austrian Economics School's theories to the healthcare industry. According to the Austrians theories Dr Foy's exactly right that the inflation induced costs of healthcare will eventually result in a bust. This will happen when the Federal government no longer can get away with printing money to sustain and grow the existing bubble. That time is obviously close at hand. Because of limited space and subject focus, Dr. Foy did not spend much time on the role of central bankers in creating this looming disaster, so here is a very truncated "Austrian" explanation of that role.
It was after the "gift" of the Federal Reserve System to America by the Europeans in 1913 that our destructive experience with booms and busts began in earnest. Prior to the FSR there were infrequent and mild expansions and contractions in the economy. They were routinely self correcting and of short duration, typically a year or less. The Austrian economist Murray N. Rothbard in "America's Great Depression", pointed out the role the FSR played in creating the credit bubble of the 1920's and how that action led to the stock market bubble, inevitable crash of '29, and the subsequent 11 year depression of the 1930's. This Great Depression of the '30's marked a major turning point in the American economy. For 11 years, from '29 until 1940, interventionist politicians tried every nostrum in Keynes's epic work "General Theory of Employment, Interest and Money" to end the depression, including protectionist tariffs (Smoot-Hawley), currency manipulation (FDR went off the gold standard), the creation of labor and industrial cartels (to keep wages and prices up), massive deficit spending make-work projects ala the Hoover Dam, TVA, WPA (make work for the vast unemployed). None of these "experiments" of interventionism in the previously private sector of the economy had any significant impact. In 1939, 11 years after the '29 crash, the unemployment rate in the US economy was only marginally better than it was in 1931, the worst year of the depression (over 25% unemployment). Now fast forward to Obama and TARP (Bush's contribution and probably necessary to avoid a total collapse of the financial industry), the 800 billion stimulus fiasco, QEs I, II, III, and ever more Keynsian stimulus and no real change in the unemployment rate in almost 4 years. Now at this point, looking back to the Great Depression of the '30's, and our experience of the last 4 - 5 years, one might logically think twice about efficacy of these Keynsian solutions to unemployment and economic contraction. It might just be time to give another set of solutions a chance. However, Obama wants to double down on the previous 4 years of policy failures with more of the same. At this point I'm beginning to find Wayne Allyn Root's theory compelling. You may remember Root as Obama's classmate at Columbia in 1983 who went on to become a successful entrepreneur but never forgot Obama and his classmates: " I was President Obama’s college classmate at Columbia University, Class of '83. Almost every one of my classmates were openly socialist or Marxist, with many of these leftist radicals calling for an end to capitalism and “bringing down the system” by destroying the U.S. economy with entitlements, debt, and crisis."
To me this sounds a lot like the Cloward-Piven strategy of orchestrated crises: bring down the capitalism by overloading the system with debt, entitlements, etc., and then when all crashes rebuild the economy using the socialism model. I have scrupulously avoided so-called conspiracy theories in the past, however couple Obama's past associations with Frank Davis in Hawaii, Bill Ayers and wife, parents who are committed socialist, when I see Obama refusing to compromise on Obamacare after the loss of the House in 2010, refusing to compromise with Boehner on the tax/spending cut confrontation last year, submitting a WH budget proposal that would increase the budget deficit to 21 trillion over the next 4 years, rhetoric to double down on the spending programs that have not worked, the latest EO to eliminate work requirements for welfare recipients, I begin to see a commitment to this Cloward-Piven strategy to destroy our economy from within.
Oh, and by the way Ken, there was another article in that same journal that was equally interesting and really quite prescient, "A letter to Mississippi Physicians", authored in 1966 by Curtis W. Caine, M.D. Dr. Caine asked his fellow physicians in Mississippi if they really wanted to go down the path of socialized medicine by signing on to the PL 89-97 , the amendments to Social Security that created Medicare and socialized healthcare for individuals 65 years of age and older. This open letter to "Esteemed colleagues" was essentially a very well thought out and argued polemic on the evils inherent in socialized medicine in general. Dr. Caine was entreating fellow physicians to not sign on to the program to take effect in 1966 and thereby cause the scheme to fail maintaining the status quo in medicine. Clearly Dr. Caine's arguments did not prevail and here we are, nearly 50 years into socialized medicine for seniors about to socialize medicine for everyone else in the country even though medicare has largely been the cause of almost all the medical cost problems highlighted in in Dr Foy's article. We are back to the wisdom of one of our founding fathers, Benjamin Franklin: "The definition of insanity is doing the same thing over and over expecting different results." Some people just never learn. Watch out for inflation down the road.
Finally, Ken, here's my platform suggestions for Romney:
No more FSR, dump fractional reserve banking, bring back the gold standard for the dollar, cut all government agencies in half, shut down K Street, put Congress on a part-time basis with half pay put them in the social security retirement program, make all Supreme Court Judges (and all other judges) pledge to uphold the US Constitution in public once a year, throw out AA, ban ethnic or gender coalitions in Congress (no CBC), eliminate Medicaid and Medicare, return Social Security to its original pay as you go insurance roots only, term limits for Congress, no government employee unions (that includes teachers unions), flat income tax, no corporate income tax, send Obama to Kenya, and, for comic relief, send Mayor Bloomberg to either Cuba, Russia, or North Korea as Ambassador in residence (must live in one of those countries full time for four years and must send a written report to the American people once a month on the joys of living there).
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