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devil duck

Cathy McMorris Rodgers, unclear on so many concepts....

I'm sure most of you have heard about this by now, but here's a Daily Kos link that includes the Congresswoman's video response to the oceans of pro-Obamacare comments she got in response to her Facebook call for Obamacare horror stories.  Apparently out of the hundreds of comments, she couldn't find even one that told the story she wanted to tell, so she cribbed some from a Republican Party web site.

"I'm a 62-year-old widow and only make $8.79 an hour.  I lost my insurance and cannot afford to pay for it." I think this is impossible: if you earn $8.79 an hour, you are almost certainly eligible for highly subsidized insurance that costs less and covers more than your old insurance did.  Unless you're too poor for even subsidized insurance, too well-off to qualify for old-style Medicaid, and you live in a state that has refused to expand Medicaid eligibility.  In which case, don't blame Obamacare; blame your state legislature and/or governor who are making their own constituents suffer in order to spite Obama.

"My family's health coverage was cancelled, and my new health care premiums increased 85% thanks to Obamacare."  This is possible, if the family was paying for catastrophic-only health coverage before, and the protagonist in this story is young, healthy, and reasonably well-off.  Again, those facts would make this person seem less sympathetic.

"Our health care costs were affordable until this law came along.  Now the increase in cost puts a serious hurt on our budget."  Again, it's possible for premiums to go up if the family in question is young, healthy, and reasonably well-off, but I doubt very much that it "puts a serious hurt on" the budget of such a family.

"A young man... was overbilled by the state exchange, and for three days they didn't have the money they needed for food, gas, or medicine."  It's certainly possible that a newly-formed state exchange makes some bureaucratic mistakes, but I have a hard time imagining a scenario under which such a bureaucratic mistake would leave someone unable to buy food, even for three days (and there are lots of people in this country who have a hard time paying for food, gas, and medicine EVERY WEEK, not just once for three days).

After selecting four data points that support her desired conclusion (and weren't even in the original data set) and ignoring hundreds that don't, she turns her keen analytical skills to the Federal budget.

"American families all across this country balance their money to pay the bills, so they can afford the co-pays at the doctor's office and send their kids to school.  Families have to prioritize; they have to save; they have to live within their means.  The Federal government needs to do likewise."

Umm... no, families do not always live within their means, and the economy would come to a grinding halt if they did.  Ever heard of a mortgage?  A college loan?  A car loan?  A responsible family -- or a responsible business-owner for that matter -- knows that there are times to borrow and invest in expansion, and times to pull in your horns, pay down debt, and save; always doing one or always doing the other is financially irresponsible.

In fact, it's mathematically impossible for everybody to save at the same time, because everybody's income is somebody else's spending.  Imagine an economy of ten people, each earning $50K/year and spending it on goods and services produced by the other nine.  No problem: the economy is doing $500K/year of business.  But suppose Bob decides to save $10K/year, spending only $40K.  Now the economy only has $490K/year of spending, so the average person's income drops to $49K/year.  For simplicity, let's assume that all ten people are average, so they each now have a $49K income.  If the other nine are "responsible" and cut back their spending to match their means, we lose another $9,000 in buying, so the total spending in the economy is now $481,000 and the average person's income has dropped again to $48,100.  If the other nine again cut back their spending to match their new reduced income, we lose another $8,100 in buying, so the total spending is now $472,900, and the average person's income has dropped again to $47,290.  And so on, until everybody in the economy is earning and spending $40,000.  But Bob is still determined to save $10K/year, so he cuts his spending further to $30K/year.  The same thing happens again: a spiral of decreasing demand until everybody is earning and spending $30K/year, and nobody is saving anything (but they're all poorer than they were before).

[It may be pointed out that by saving $10K, Bob has caused interest rates to drop, thus making it easier for businesses to borrow and invest in expansion.  Which is no help if everybody's being "responsible" and not borrowing money; it's also no help if interest rates are already near zero; and it's also also no help if businesses see no profit in expanding because they can't sell what they're already producing.  In short, encouraging saving in order to lower interest rates is useful in an overheated economy, not in an underheated one.]

[It may also be pointed out that by not-spending $10K, Bob has caused prices of goods and services to fall, thus making everybody's reduced incomes go farther.  There's something to this: in an eventual equilibrium state, if everybody's spending 20% less but producing the same amount, those goods and services will cost 20% less so everybody's standard of living actually hasn't changed.  But it takes a while to reach this equilibrium, and there can be a lot of disruption on the way -- especially for anybody who did borrow money, because their debt is now larger in real terms than they planned for.  But it's great for lenders....]

How can you avoid this sort of death spiral?  With irresponsibility.  If somebody's saving, somebody else must be borrowing.  If Person A in the above economy decides to spend $10K less and save it, but Person B is willing to borrow $10K and spend it, all is well.

In 2008, lots of businesses and families all decided simultaneously to cut spending, pay down their debts, and save money.  The Federal government responded by spending a lot of borrowed money to stave off the death spiral, and it was mostly successful for the first year or so.  Normally, the government would continue deficit-spending until the economy was reasonably healthy, but "this time is different": starting in 2010, Republicans in Congress and around the country decided the deficit was a more urgent problem than jobs (or, mysteriously, that cutting the deficit by laying people off in the middle of a recession would create jobs), and Democrats for some unfathomable reason went along with them, insisting that the government stop spending so much borrowed money.  The economy, predictably, slowed down again.  Many European countries enacted even more austere budgets, with the predictable result that those countries went back into full-scale recession; they're still not saving much, but everybody's much poorer than before, and a whole generation of workers have six years of unemployment on their records.

So my response to the Congresswoman's incisive comments on financial responsibility: if all of the families and businesses in the country are being "responsible" by spending less than they earn, the government must spend money it doesn't have, or the economy will collapse.  (Fortunately, the U.S. government can currently borrow money at ridiculously low interest rates, so if there was ever a good time to for government deficit spending, now is the time.)

Or maybe that's been the plan all along: force the economy to collapse while Obama is President, so voters will blame him, not re-elect him, learn their lesson, and never elect a Democratic President again.  The "won't re-elect him" part didn't pan out, but they can still hope for the last bit.


Wow, thanks for linking. I clicked through to read some (it's enormous!) of the original FB thread and it's amazing and heartbreaking and heartening.