Monday, December 5, 2016

Donald Trump: Barack Obama Part Deux?

Two of the most dysfunctional areas of the American economy are healthcare and education, not coincidentally, two of the areas of the economy that the government has the most control and influence.

In healthcare, while there is ostensibly some private elements to it, the reality is that government regulations control almost every aspect of it. From the HIPAA forms about sharing your information you sign at the doctor’s office to what services insurance must cover to how much doctors can charge – or more accurately, get reimbursed for – Medicare patients. As much as one might want to point the finger at Obamacare, the reality is, healthcare was a mess long before Barry gave us the disaster that fittingly bears his name.

Much of that dysfunction stems from the fact that in healthcare there is little correlation between what people pay and the services they get. Why? The main reason is because insurance covers almost all of the cost for healthcare, and most Americans get their insurance through their employer, tax free. And why is that? Why isn’t health insurance like car insurance or homeowner’s insurance? Because of the government, of course. It largely started during WWII when wages and price controls were implemented and in 1943 the IRS made health insurance a tax free benefit to employees… and thus employers could offer insurance benefits to attract employees when they had little control over what they could pay. After the war Congress codified the There are other reasons of course, including government regulations that prohibit insurance companies from offering insurance across state lines, a broken tort system, and the general dysfunction in the Medicaid and Medicare programs.

In education the story is a bit different. Government directly controls in excess of 90% of the education spending in the country. Although most of the dollars are spent at the state and local level, the federal government has been seizing more and more control for the last 40 years, particularly after the establishment of the US Department of Education under Jimmy Carter. Add to that the fact that the Democrat party is almost a wholly owned subsidiary of the teacher’s unions and you understand that most large cities, school systems are not about education, but rather they are a jobs program for Democrat politicians and union donors. And the result is an education system that is more expensive than virtually any in the world on a per capita basis, but one that produces students who trail much of the developed world in testing and keeps the most challenged students in the worst performing schools.

The bottom line is that government does very little well, whether it’s education, healthcare or and we’ve come to see, choosing business outcomes. Just look back at Barack Obama’s green energy boondoggles, from Solyndra to Fisker… they are big versions of the failures states and local governments have been making for decades with their various sports stadium financing failures. Government deciding how businesses should be run and getting choosing winners and losers in business is just as much of a failure of what they’ve done with education and healthcare.

But change is in the air. We have a businessman who will be running the country, who will fix things, starting with business… Um… not so much.

Donald Trump, already known as a fan of big government and eminent domain has, even before he’s been sworn in, taken steps to show that we may be looking at four more years of the same thing… only with different oxen being slayed or spared the ax. Rather than talking about making America a place where companies want to invest, hire and operate, rather than talking about America being a place that all companies can make a profit, Donald Trump has been threatening companies who might have the audacity to try and escape America’s confiscatory tax rates by moving jobs overseas. Indeed last week he “saved 1,000 jobs” by meeting with Carrier and… giving them tax breaks from the state that other businesses can’t get!

So here we have a new president who uses the bully pulpit to threaten companies who don’t do what he wants and he uses tax breaks to get others to do so. That sounds very much like Barack Obama eight years ago… and we know how that turned out with lots of debt, failures and a GDP that has averaged under 2%. With Trump, rather than targeting coal and energy companies the bullseye will be on companies who want to make money for shareholders by escaping an uncompetitive business environment in the heavily regulated United States.

Of course Trump hasn’t even been sworn in yet. Maybe this was just a one off with Trump trying to fulfill a very specific campaign pledge. But then again, maybe not. Either way, it doesn’t say much for Donald Trump’s appreciation for free markets or limited government.