People make jokes about lawyers but the law is foundation of prosperity in this and all prosperous societies. Joel Mokyr, in his books on the history of economics and technology, concludes that the reason why technology and progress in the Roman empire ended with the fall of Rome was the lack of laws that protected inventors and those who developed new technology. A working steam engine was invented in Alexandria in about 62 AD by Heron (often spelled Hero) of Alexandria. It was used to open temple doors and there were other applications. Inventions continued through the Middle Ages but the Industrial Revolution required laws, including patent laws, so that people who did the work would be rewarded in some logical way. In addition, another example may well be the revocation of the Edict of Nantes by Louis XIV in 1685, which sent the Huguenots fleeing to other countries, principally England and Holland. The exodus included 400,000 Protestants who were among the most inventive and industrious of France’s citizens. With them, went the Industrial Revolution.
Why do I bring this up now ? The Obamacare legislation is an attack on the rule of law in this country’s health care economy.
UPDATE: The Obama supporters, like this New York Times reporter have a laughingly ignorant concept of what the rule of law means.
Representative Paul D. Ryan, Republican of Wisconsin, alluded to “The Road to Serfdom” in introducing his economic “Roadmap for America’s Future,” which many other Republicans have embraced. Ron Johnson, who entered politics through a Tea Party meeting and is now the Republican nominee for Senate in Wisconsin, asserted that the $20 billion escrow fund that the Obama administration forced BP to set up to pay damages from the Gulf of Mexico oil spill circumvented “the rule of law,” Hayek’s term for the unwritten code that prohibits the government from interfering with the pursuit of “personal ends and desires.”
The law, of course, is written down. The problem is with people who don’t follow it. Such is the state of knowledge at the New York Times.
On September 30th, Janet Adamy reported for The Wall Street Journal that McDonald’s was considering canceling its health insurance plan for nearly 30,000 hourly restaurant workers unless new Obamacare regulations were waived. The White House pushed back hard with U.S. Department of Health and Human Services spokeswoman Jessica Santillo claiming: “This story is wrong. The new law provides significant flexibility to maintain coverage for workers.” But this Tuesday we learned that Adamy was correct. According to Bloomberg News McDonald’s had sought, and eventually won, a waiver from the upcoming Obamacare regulations. This allows them to continue providing health insurance coverage to 115,000 workers. In fact, McDonald’s workers were just some of the over 1 million of Americans who were spared losing their current health care coverage thanks to one-year waivers from the Obama HHS.
The big companies are gaining waivers while small business will face all the onerous regulations of the bill.
a letter HHS Secretary Kathleen Sebelius sent to the nation’s health insurers threatening to exclude them from the yet to be implemented Obamacare health exchanges. The letter warned there “will be zero tolerance” for “falsely blaming premium increases” on Obamacare. And who would determine if premium increases were or were not due to Obamacare? The Obama administration of course.
So health insurance companies can be excluded from participation if they tell subscribers that the new legislation will raise premiums. What law authorizes this ? None.
We now know that 22,000 bureaucrats will be hired to write regulations that no one knows now and which are based purely on the bureaucrat’s opinion. The law will be entirely enacted by “Administrative Action”. There is no law saying what the principles should be. Congress passed a bill it had not read and which establishes a framework for bureaucrats to write the laws.
Enactment of PPACA is the first step to this control; the law must be implemented by administrative action. While it is detailed in some instances, PPACA is largely aspirational; it directs the Administration to achieve various universally desired goals—better quality of health care, improved access to care, and increased efficiency of delivery. It constructs the scaffolding of federal control and gives the Administration very broad authority to achieve these aspirations.[3] Each of the many actions taken to implement it will determine the shape of that control. Implementation will be technically difficult and politically charged.
PPACA is based on the premise that the federal government can—and must—regulate the details of the health care financing and delivery systems. With its enactment, health care has been thoroughly bureaucratized—since it must be implemented by public servants—and politicized by the Administration and Congress. Bureaucratization and politicization are the inevitable characteristics of government action.
Health care is infinitely complex. Patients and those who provide and pay for their care engage in millions of discrete but interrelated transactions. It is hubristic to believe that the federal government can determine the one “right” approach to organizing the health care system. Yet PPACA attempts to do just that. PPACA represents an effort to impose a uniform template on the health care system. It significantly reduces the ability of patients and providers to choose how to accommodate their different circumstances and individual desires.
If you would like an example of what happens when people ignore the rule of law in commerce, here is one. Dubai is one of the United Arab Emirates. It was an oil state but, as the oil flows has declined, the ruler decided to build a commercial center. Many rushed to invest.
Today, Dubai has emerged as a global city and a business hub.[7] Although Dubai’s economy was built on the oil industry, currently the emirate’s model of business, similar to that of Western countries, drives its economy, with the effect that its main revenues are now from tourism, real estate, and financial services.[8][9][10] Dubai has recently attracted world attention through many innovative large construction projects and sports events. This increased attention has highlighted labour rights and human rights issues concerning its largely South Asian workforce.[11] Dubai’s property market experienced a major deterioration in 2008 and 2009 as a result of the worldwide economic downturn following the Financial crisis of 2007–2010.[12]
In fact, its property market collapsed. Now some investors have discovered that getting their money back may be very difficult as the laws are changing every month.
Dubai’s real estate regulators have issued a flurry of rules since 2008 to clarify the situation and to comfort potential investors. But new rules sometimes contradict others issued just months earlier, often in ways that leave developers with the advantage and property buyers in a legal limbo, making many wary of ever investing in Dubai again.
Without the rule of law, no one knows what anything is worth or what sort of return one might expect from an investment. The Obama Administration seemed to have taken its approach to law from the Dubai model.
UPDATE: Here is a very good article by Amity Schlaes on the sanctity of contracts. Harding and Coolidge ended a severe recession after World War I by cutting government spending and leaving the economy to pull itself out of the ditch. That worked much better than FDR’s efforts or Obama’s stimulus.
Tags: economics, health care, Obama, politics
Bureaucratization and politicization are the inevitable characteristics of government action.
Amen.
An ensconced bureaucracy and attendant political support is the kudzu weed of our societal landscape. A small sample would be the Agriculture Department, where even in our current times of record farm income, they hyper-actively add more rules and options and $$$ to the price support programs that remunerates millionaires. It helps that they have a field office in just about every county in the country that provides a pretty easy middle class job. In this day of electronic filing they could consolidate some of these, but good luck with that. Wait until every congressional district has their multitude of government run Health Care Offices. It will be like in the movies.
PPACA is based on the premise that the federal government can—and must—regulate the details of the health care financing and delivery systems.
It reminds me of the story of the head of the Soviet GUM store touring US grocery stores. At one point he asks, “who sets all these prices?” The tour guides looked at each other and said, “the market sets them.” The Soviet laughs and says, “no, really, who sets them?”