ObamaCare Fallout

When discussing the fallout from the ongoing disaster called ObamaCare, a friend recently stated that he did not really care about the problems; this was a first step and they would get the problems fixed.  He was just glad that they were doing something, and assumed the details would be worked out eventually.  In fact, his only complaint was for the Republicans and especially the Tea Party, because they just wanted to repeal the bill with no alternative and this would leave us at the mercy of the insurance companies.  As he saw it, we are the richest country in the world and thus we should be able to afford this.

While there is a lot wrong with this view, such views are very common and reveal some of the big divides that are splitting the country.  The first is between those who trust governments more than they trust the market place when it comes to solving problems.  Thus here, despite all the problems and chaos with the roll out of Obama Care, the hundreds of millions of dollars spend on a web site that doesn’t work, the millions losing their health insurance or paying high premiums for less coverage despite promises and guarantees to the contrary, there is just an assumption that government will eventually get all the problems worked out.

But is this really true? While it is likely that eventually they may get some version of the web site up, not even that is certain, and least not any time soon.  As Jon Coupal points out, government has a dismal record in this area. Using California as an example he points to a $62 million software upgrade that, “triggered a backlog of 100,000 jobless claims and thousands of unemployed were still waiting for their benefits more than a month later.”  Then there was the overhaul of the state payroll system that was cancelled after spending $250 million. A review concluded that “canceled projects, cost overruns and delays have cost taxpayers more than $2 billion.”  Nor is it just IT project as the article goes on to document the “gross mismanagement of transportation and highway construction projects.”

One might argue that these are large projects that any business would have problems with. Perhaps, but Coupal presents an interesting contrast.  When a section of the 10 Freeway collapsed during the Northridge earthquake the state estimated that it would take two years to repair, assuming there were no overruns that experience shows are very common.  Since this was unacceptable the job was turned over to a private contractor, who was given 5 month to complete the job.  He finished in 73 days.

Why the difference?  Are private sector employees just better than government employees? No. The difference is not in the people; it is in the environment in which they work.  While those who look to government often deride the private sector as being driven by the profit motive, it is the profit motive that makes the private sector so much better.  While the profit motive is frequently denigrated as little more than greed, what it actually does is force the private sector to be responsive to their customers.

The big difference between the private sector and government sector is not that those in the private sector are greedy while those in government are somehow nobler. People are people.  Those in the private sector are forced to address the needs and desires of their customers. If they do not, their customers can go elsewhere and they will go out of business.  As a result the marketplace, when it is allowed to function, delivers a wide range of selections and prices and people are free to pick the options that best suits them.

In the private sector costs are watched closely and there is an ongoing drive to innovate so as to deliver a better product at a lower cost and thus beat the competition.  These pressures to meet people’s needs are greatly reduced if not absent from government.  In government, budgets normally get automatic increases regardless of performance. In fact poor performance frequently results greater increases to budgets as money is thrown at problems. When business needs money they can try to cut cost or raise prices.  If people can’t or won’t pay, the company goes out of business. When government needs more money, rarely if ever do they cut costs but instead raise taxes.  If people can’t or won’t pay?  Well that really does not matter. Taxes are not voluntary.

Often the appeal is, as it was for my friend that we are a rich country.  We, or at least the rich, can afford it.  But that ignores our current situation.  True, the numbers are so vast it is very difficult to really comprehend.  So to make things a bit more understandable, let’s divide all the number by $100,000,000 such that our $3 trillion federal budget is only $30,000, the size of a family income.

So putting our current situation in terms of this family; it makes $30,000 per year, but is spending $38,000 per year and currently has a credit card debt of $170,000 (debt), and another $700,000 (unfunded liabilities) in other debts, for a total debt of $870,000.  Recently one spouse, against the wishes of the other, bought a Yugo (ObamaCare) for $10,000.  The dealer recently called and said that some of the features were not going to be delivered with the car, and that the price had risen to $30,000 and is likely to go even higher.  Thus a fight ensues over whether or not to accept the car (the shutdown).  In the middle of the fight, the new Yugo was delivered, but predictably does not work.

At the same time the credit cards max out (debt limit).  The spouse who complained about the Yugo wants to talk about ways to get their budget under control.  The spouse who wanted the Yugo refuses to even talk about it until they get some more credit cards (increase the debt limit).  So the one spouse concedes and allows the Yugo to stay and also agrees to take out more credit cards without any conditions, at least until the issue comes up again in a few months.

Is this family financially ok? Of course not.  They have not addressed the problem, but instead are only making the problem worse.  That is pretty much the position we now find ourselves.  Again, take these amounts and multiple them by $100,000,000 and you have the situation for the country.  It also describes the division in the country.