by Sheldon Richman, FFF

In Washington, the rule is: If a little poison doesn’t cure the patient, give him more.

This rule is being applied not only to health care, where massive doses of government intervention are being prescribed to treat the toxicity of past government intervention. It’s also being used in the attempt to end the recession.

When Barack Obama took power he told the American people that an “economic stimulus” bill was indispensable to fixing the economy. Sensible economists warned against it, but no politician wants to be perceived as doing nothing. So logic and well-reasoned economic theory were once again tossed out in favor of massive government spending: close to $500 billion for state and local governments and special interests. But even on its own terms, the “stimulus” was no such thing. Most of the spending was far off into the future. The government says that only $60 billion of $499 billion has been allocated in the five months since Obama signed the bill. It’s hard to believe, but there is a limit to how fast federal, state, and local governments can spend money.

That raises the question: how stimulating can stimulus be? The answer is: not much. The politicians promised it would reduce unemployment, but the jobless rate continues to rise, standing now at 9.5 percent.

The lack of improvement is so acute that even Vice President Joe Biden says the administration underestimated how bad the economy was and congressional leaders are talking about a second stimulus package.

Again, on its own terms, this is just silly. If the bureaucrats can’t spend half a trillion quickly enough to goose the economy, what’s the point of giving them more money?

Of course, we can only take the stimulus logic on its own terms for the sake of argument. The stimulus logic is wrong, so things are worse than described.

Even if the government could have spent the half trillion in the first 24 hours, it wouldn’t have fixed the economy. That’s because the problem isn’t inadequate spending. The problem is the distortions in the economy that the government caused through pervasive intervention. Thus more intervention through spending will only make things worse.

First, let’s look at what’s wrong with the stimulus logic. Government has no money that it hasn’t first lifted one way or another out of the private sector. It creates nothing of value. The federal budget is deep in the red, so to increase spending the Treasury has to borrow the money. But borrowed money obviously is already in the economy, and the lenders would have been willing to lend it to finance productive private ventures had the government not borrowed it instead. There can be no net stimulus if government is simply reallocating capital.

Moreover, government reallocation is not merely a neutral substitution of its projects for private ones. Government doesn’t have to make a profit or risk going out of business. So its spending is not driven by the need to satisfy consumers who are free to spend their money as they like. In contrast, entrepreneurs invest capital with an eye to satisfying what consumers see as their most important demands.

Government spending is dictated by the political agenda, while private investment is shaped by consumer welfare and efficiency considerations.

Bottom line: government adds nothing, but rather takes resources that already exist and devotes them to inferior purposes.

That is only the beginning of trouble. The government’s debt will sooner or later be covered by the Federal Reserve’s expansionary monetary policies. While the Fed can create money, it can’t create real resources. So the new money will bid up the prices of all kinds of goods and shift purchasing power from the mass of people a favored few. That is as much a tax as one collected by the Internal Revenue Service. The inflation will further distort the structure of the economy and pave the road to the next downturn and next round of unemployment.

The “stimulus” isn’t working because it can’t work. A new “stimulus” is therefore idiotic. Freeing the economy is the only path to sustainable prosperity.

Sheldon Richman is senior fellow at The Future of Freedom Foundation, author of Tethered Citizens: Time to Repeal the Welfare State, and editor ofThe Freeman magazine. Visit his blog “Free Association” atwww.sheldonrichman.com.

The costly truth about Canada’s health care system

by John Stossel

President Obama says government will make health care cheaper and better. But there’s no free lunch.

In England, health care is “free”—as long as you don’t mind waiting. People wait so long for dentist appointments that some pull their own teeth. At any one time, half a million people are waiting to get into a British hospital. A British paper reports that one hospital tried to save money by not changing bedsheets. Instead of washing sheets, the staff was encouraged to just turn them over.

Obama insists he is not “trying to bring about government-run healthcare.”

“But government management does the same thing,” says Sally Pipes of the Pacific Research Institute. “To reduce costs they’ll have to ration—deny—care.”

“People line up for care, some of them die. That’s what happens,” says Canadian doctor David Gratzer, author of The Cure. He liked Canada’s government health care until he started treating patients.

“The more time I spent in the Canadian system, the more I came across people waiting for radiation therapy, waiting for the knee replacement so they could finally walk up to the second floor of their house.” “You want to see your neurologist because of your stress headache? No problem! Just wait six months. You want an MRI? No problem! Free as the air! Just wait six months.”

Polls show most Canadians like their free health care, but most people aren’t sick when the poll-taker calls. Canadian doctors told us the system is cracking. One complained that he can’t get heart-attack victims into the ICU.

In America, people wait in emergency rooms, too, but it’s much worse in Canada. If you’re sick enough to be admitted, the average wait is 23 hours.

“We can’t send these patients to other hospitals. Dr. Eric Letovsky told us. “Every other emergency department in the country is just as packed as we are.”

More than a million and a half Canadians say they can’t find a family doctor. Some towns hold lotteries to determine who gets a doctor. In Norwood, Ontario, 20/20 videotaped a town clerk pulling the names of the lucky winners out of a lottery box. The losers must wait to see a doctor.

Shirley Healy, like many sick Canadians, came to America for surgery. Her doctor in British Columbia told her she had only a few weeks to live because a blocked artery kept her from digesting food. Yet Canadian officials called her surgery “elective.”

“The only thing elective about this surgery was I elected to live,” she said.

It’s true that America’s partly profit-driven, partly bureaucratic system is expensive, and sometimes wasteful, but the pursuit of profit reduces waste and costs and gives the world the improvements in medicine that ease pain and save lives.

“[America] is the country of medical innovation. This is where people come when they need treatment,” Dr. Gratzer says.

“Literally we’re surrounded by medical miracles. Death by cardiovascular disease has dropped by two-thirds in the last 50 years. You’ve got to pay a price for that type of advancement.”

Canada and England don’t pay the price because they freeload off American innovation. If America adopted their systems, we could worry less about paying for health care, but we’d get 2009-level care—forever. Government monopolies don’t innovate. Profit seekers do.

We saw this in Canada, where we did find one area of medicine that offers easy access to cutting-edge technology—CT scan, endoscopy, thoracoscopy, laparoscopy, etc. It was open 24/7. Patients didn’t have to wait.

But you have to bark or meow to get that kind of treatment. Animal care is the one area of medicine that hasn’t been taken over by the government. Dogs can get a CT scan in one day. For people, the waiting list is a month.

by Peter Whoriskey

If a new General Motors emerges from bankruptcy as planned, U.S. financial aid for the company will expand to nearly $50 billion, but neither the government nor the company is forecasting how much of the public money will be repaid.

It’s sure to be a stretch. For the United States to fully recover its investment, the value of General Motors stock will have to reach levels it has never before attained.

“I’m not going to predict it — that’s not my job today,” GM chief executive Fritz Henderson said in a recent interview.

“I don’t know how much we’re going to recover,” a senior Obama administration official said as the company headed into bankruptcy last month.

This uncertainty stems from the difficulty in valuing the 60 percent GM stake that the United States will receive in exchange for the public investment. The government also gets preferred shares and other compensation.

The stake will be worth enough to fully cover the government’s direct investment only if GM’s stock rises above $68 billion. Even at its recent 2000 peak, GM’s stock was worth only $56 billion.

“I don’t see GM hitting those benchmarks in a very long time,” said Maryann Keller, a veteran automotive analyst and author of “Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors,” which was published in 1989.

She noted that global competition will continue to squeeze American automakers. Though the world’s factories can produce about 100 million vehicles a year, demand for them only stands at about 55 million, and the gap will push prices and profits down, she said.

“It’s very unlikely” that the government will recover its money, said David Whiston, auto equities analyst at Morningstar. “GM will be a smaller company after the bankruptcy and there are going to be more foreign automakers entering the market that will make GM’s efforts more difficult.”

Both administration and GM officials assert that after the company springs from bankruptcy — newly streamlined and freed of most of its debts — the automaker will reverse its financial fall. Its recovery will pay further, hard-to-measure dividends by supporting the U.S. economy, they add.

The company’s own internal analysis, prepared by Evercore Partners and presented to the company’s board on May 31, shows how the government could recover its investment. According to that presentation, the equity value of the company in 2012 will range from $59 billion to $77 billion. If the stock value rises to the high end of that range, the U.S. could recover all of its investment.

“We have certainly looked at scenarios where, over time, a very substantial portion and potentially all of the taxpayer investment in General Motors will be returned,” Ron Bloom, a senior adviser to the administration’s auto task force, told a Senate committee earlier this month. “But I certainly by no means would say that I am highly confident that that will occur.”

Bloom and GM chief executive Henderson have suggested that by shedding so much of its debt through bankruptcy, the company’s value would be less encumbered and its stock prices freer to rise.

Henderson said it would be easy to envision GM’s stock rising to levels high enough to cover the government’s investment if the company’s revenues approximate what they were before the economy faltered.

“Can a company with $100 [billion] to $140 billion of revenue have $70 billion of market cap?” Henderson said in an interview last week at the company’s headquarters. “Yeah.”

He said, “It’s a function of how we execute, and do we get the margins out of the business that we need?”

As the auto rescue has unfolded, the question of whether the government will be repaid has taken on increasingly political overtones, as partisans debate whether the Bush administration or the Obama administration has handled the industry better.

The Bush administration began the GM bailout in December, offering the company emergency loans that grew over the coming months to nearly $20 billion. The loan terms called for the company to be restructured.

The Obama administration called the company’s restructuring efforts inadequate and steered GM toward bankruptcy, from which the company is expected to emerge in July.

The government is planning to give the automaker an additional $30 billion as part of the plan to revive the company through bankruptcy.

In exchange, the government gets the 60 percent equity stake, and GM will also owe about $6.7 billion in secured debt and about $2.1 billion in preferred shares.

Assuming the government is repaid the debt and preferred shares, the value of the company’s common shares would then have to rise to roughly $68 billion to pay back the remaining $41 billion in direct GM investment.

These calculations do not include the billions of dollars that the United States has put into GMAC, GM’s financing arm, and into aiding auto suppliers. On the other hand, it does not capture the likely returns of those investments, nor do the calculations include the stock dilution caused by options, which could raise the break-even point.

In announcing the government’s intention to put another $30 billion into the company earlier this month, President Obama said, “We’re making these investments not because I want to spend the American people’s tax dollars, but because I want to protect them.”

How long it will take to recover them may not be clear for years.

by Dom Armentano

An editorial in the July-August 2009 AARP Bulletin repeats the same bromide heard almost nightly on the MSM news: That there are currently 47 million Americans without health insurance. The AARP editorial goes on to argue that this situation is disgraceful; that all Americans should have “affordable health care choices”; and that in terms of reform, “the time to act is now.”

The sad tale of the 47 million uninsured is, perhaps, the most emotionally persuasive argument put forth for national health care reform. But is the alleged number of uninsured reasonably accurate? Or is it, instead, a purposely misleading statistic designed to advance a specific reform agenda?

The 47 million uninsured number is generated by an annual U.S. Census Bureau report. However, that report also states that the 47 million uninsured includes roughly 10 million illegal aliens without health insurance. Thus, if we subtract out the illegals, the number of uninsured American citizens without health insurance declines by more than 20%…to roughly 37 million.

But is it accurate to assume that even 37 million Americans cannot afford health insurance? Absolutely NOT. Even Hillary Clinton during her presidential campaign once admitted that 25% of the uninsured could afford health insurance but chose not to purchase it. The Census Bureau reports that there are roughly 17 million people who make more than $50,000 per year and who, for whatever reason, decide not to carry health insurance.

In short, with two reasonable adjustments, the number of Americans who cannot afford health insurance has been reduced from 47 million to approximately 20 million.

But is the 20 million figure itself reasonably accurate? Probably not. Individuals moving between jobs lose their (employer provided) health insurance and when they do the Census Bureau counts them as “uninsured.” Technically true. Yet during normal times, roughly half of these individuals will have re-acquired (in about 4 months) health insurance coverage with a new employer.

Finally, there are millions of adult Americans and children who have (nearly free) access to medical care benefits through Medicaid and other government programs who don’t really need the direct cost of “insurance” and who don’t carry any.

Thus, with reasonable adjustments, there are in fact less than 10 million individuals who are so-called “chronically uninsured.” (The Kaiser Family Foundation says the number could be as low as 8 million). These are individuals who have been unemployed for over 2 years and/or people from households that are too poor to afford non-employer health insurance premiums and who, for whatever reason, have limited access to taxpayer-supported health services.

So let’s grant that there are between 8 to 10 million Americans (total population: 307 million) who cannot afford health insurance and that this situation may require a marginal public policy adjustment. (Most states mandate expensive benefit coverage; curtailing those mandates would lower the cost of health insurance.) But whether that situation requires some massive, Washington D.C. health care reform – with new regulations and mandates on health care providers, insurance companies, and drug manufacturers – is entirely problematic.

Politicians and interest groups, eager to remake your medical world over to their liking, would do well to respect the Hippocratic oath administered to physicians: “First, do no harm.”

by Lyubov Pronina

Proposed Global Currency

July 10 (Bloomberg) — Russian President Dmitry Medvedev illustrated his call for a supranational currency to replace the dollar by pulling from his pocket a sample coin of a “united future world currency.”

“Here it is,” Medvedev told reporters today in L’Aquila, Italy, after a summit of the Group of Eight nations. “You can see it and touch it.”

The coin, which bears the words “unity in diversity,” was minted in Belgium and presented to the heads of G-8 delegations, Medvedev said.

The question of a supranational currency “concerns everyone now, even the mints,” Medvedev said. The test coin “means they’re getting ready. I think it’s a good sign that we understand how interdependent we are.”

Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the U.S. dollar’s future as a global reserve currency. Russia’s proposals for the G-20 meeting in London in April included the creation of a supranational currency.