Feingold says there may be no health care bill passed

Paul Nachman writes:

Sen. Feingold tells constituents there will probably be no health-care bill before Christmas, and maybe none at all. Here’s a note I sent him via his online contact form:

Dear Senator Feingold,

I just read the 8/25/2009 article from the Lakeland Times about your townhall meeting in Iron County at which you suggested that all this nationwide sturm und drang may ultimately result in the passage of **no** health care bill.

I think that’s an outcome devoutly to be hoped for; I explain why, implicitly, in a letter I’ve submitted to my local paper here in Bozeman, Montana. My letter, which I’ll paste below, contains a fundamental point which I haven’t seen discussed publicly.

But I also want to congratulate you/thank you for—according to the Lakeland Times reporter’s account—conducting a civil meeting at which you, from all appearances, actually listened to what your constituents were saying, in highly refreshing contrast to the behavior of so many of your fellow Congressional grandees.

Regarding health care, why not go back to the drawing board to focus on tort reform and on allowing health insurers to sell policies interstate?


Paul Nachman

My letter to the Bozeman paper:

The spirited exchanges about health-care policy in the Chronicle’s letters columns haven’t touched on the sheer impracticality of this attempt to re-jigger 1/6 of the U.S. economy.

Consider, for example, the 1,018-page House bill, H.R.3200. In its first 200 pages, the word “Secretary,” referring to the Secretary of Health and Human Services, appears about 140 times. Mostly these are directives to the Secretary: “the Secretary shall develop,” “shall ensure,” “as specified by the Secretary,” etc. Those 200 pages are no anomaly. Elsewhere in the bill, it’s never more than a few pages before “the Secretary” receives further instructions. So if H.R. 3200 is enacted into law, beleaguered bureaucrats under the Secretary of HHS will be tasked to produce tens of thousands of pages of painstaking regulations.

My point? It was made best, in a more general context, by the great economist Thomas Sowell: “Many economic issues are complex, but sometimes a single fact will tell you all you need to know. When you know that central planners in the Soviet Union had to set 24 million prices—and keep adjusting them, relative to one another, as conditions changed—you realize that central planning did not just happen to fail. It had no chance of succeeding from the outset. It is a wholly different ball game when hundreds of millions of people individually keep track of the relatively few prices they need to know for their own decision making in a market economy.”

The health-care portion of our economy today is surely as large as the whole Soviet economy at its apex. Thus Sowell’s blunt wisdom makes us face inconvenient facts—what H.R.3200 and Senator Baucus’s yet-unrevealed Senate equivalent aim to do are fantasies, disasters in waiting.

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LA replies:

I was intrigued by Paul Nachman’s claim that the Soviet economy was never larger than one-sixth the present U.S. economy, so I did some checking. Here’s a letter to the New York Times in 1988 that directly compares Soviet and American gross domestic product. Since the letter writer is arguing that USSR economy is doing as well as the U.S. (he’s saying this three years before the USSR ceased to exist!), and how economic growth in both cases is “mediocre” (he’s saying this after several years of the tremendous Reagan boom that made it impossible for the Soviets to compete with the U.S. in defense spending!), and given his relativism between the Soviet system and the American system (“There’s not much here for fans of either economic system to cheer about”), I don’t know that I would regard his information as objective. (Confession: after I saw those comments dismissing the Reagan economy and saying that the U.S economic system didn’t “offer much to cheer about” in relation to the Communist economic system, I thought to myself, “I bet this guy is a Jew,” then I looked for his name at the bottom of the letter and saw that I was right.)

However, he reports that in 1986, the Soviet GDP was $1.714 trillion and the U.S. GDP was $4.235 trillion.

Thus he Soviet GDP was 40 percent of the American. For $1.714 trillion to equal one sixth of today’s U.S. GDP, the latter would have to be $10.284 trillion.

According to Wikipedia, U.S. GDP in 2007 was $14.264 trillion. But that’s not corrected for inflation, and I wouldn’t know how to convert the 2007 figure to 1986 terms. But again, for the health-care portion of our economy today to be as large as the whole Soviet economy at its apex, it would have to be $10.284 trillion in 1986 dollars.

Here’s the 1988 letter to the Times:

To the Editor:

There is a subtle inconsistency between the text of the second article in your ”Eastern Europe and Gorbachev” series (”Soviet Letting Trade Partners Shop Around in Hard Times,” front page, Jan. 4) and its supporting statistical data. By means primarily of anecdotes (e.g., a fuel shortage forces Rumanian musicians to play with ”fingerless gloves”), but little pertinent economic data, the article paints a dismal picture of economic conditions.

On the other hand, the accompanying data for the Soviet Union, the dominant economy of the region, seems to indicate that, for that economy at least, things aren’t quite so bad. Those data show the Soviet gross domestic product grew from $1.112 trillion in 1980 to $1.714 trillion in 1986. In the same period United States gross domestic product grew from $2.732 trillion to $4.235 trillion. Both figures are given in nonconstant dollars. When corrected for inflation, these numbers show that the average annual growth rates for gross domestic product in this period are 2.45 percent for the United States and 2.35 percent for the Soviet Union. In short, the growth rates of these two dissimilar and disconnected economies are remarkable chiefly for their similarity and their mediocrity. There’s not much here for fans of either economic system to cheer about.

It may be argued that the Russians ought to be more worried about these roughly equal growth rates than we, because their goal is to catch up—not just keep up—with us, and clearly (as ”perestroika” shows), they are worried. Nor can it be denied that life is—on average—a lot less comfortable in Eastern Europe than in the West. But the prevalent Western belief that the American economy is growing much faster than the Soviet just isn’t so.

Finally, as for musicians playing with fingerless gloves, I don’t think you should have any difficulty finding Western musicians who play their instruments wearing no gloves at all—on the sidewalks and in the subways of New York City in the dead of winter.

RALPH CHERNOFF Santa Cruz, Calif., Jan. 5, 1988

Paul Nachman writes:

Go here (a 2.5-MB wad), to pages numbered 194 and 195 to get inflation-adjusted figures for the US GDP. Divide the first column’s numbers by those in the second column. Your results are then all in Year 2000 dollars:

1989—$6.9 trillion 2008 (est)—$11.74 trillion

And according to this, the Soviet economy of 1989 produced about $2.7 trillion.

If all those numbers are correct, 1/6 of today’s U.S. economy would be “only” $1.96 trillion, about 2/3 of the 1989 Soviet economy. Put another way, the U.S. economy of today is 4.35X the 1989 Soviet economy, not greater than 6X it.

However …

1. Those Soviet numbers come from the CIA Factbook, and I’ve heard that the CIA was notorious for (in good faith) greatly overestimating Soviet economic performance.

2. My point stands, even if my arithmetic isn’t literally true—we’re talking about central planning of U.S. healthcare, which would be just the monstrosity Sowell talks about so elegantly and succinctly. (I think I’ve heard that the aggregate Medicare rules®s amount to ~100,000 pages. I’d like to track that down.) [LA replies: Of course it doesn’t affect your main point, it was just an interesting idea, that present U.S. health care costs equal the USSR economy at its zenith.]

And that’s central planning even without the public option, given the miasma of mandates that would be levied on insurance companies and given all the bureaucratic superstructure that would be needed to advise, monitor, and enforce.

Matt C. writes:

Here is how to convert dollars in year x to dollars in year y, assuming a yearly inflation rate of p%:

One dollar in year x is equal to (1 + p/100)^(y-x) dollars in year y.

So, d dollars in year x is equal to d * (1 + p/100)^(y-x) dollars in year y.

For example, if we have 10 dollars in 1990, assume 3% yearly inflation, and wonder what it would be worth in 2000, we have d = 10, x = 1990, y = 2000, and p = 3. So p/100 = 0.03, 1 + p/100 = 1.03 and y-x = 10 and we’re left with

10 dollars in 1990 is equal to 10 * 1.03^10 = 13.44 dollars in 2000.


10 dollars in 2000 is equal to 10 * 1.03^(-10) = 7.44 dollars in 1990.

The general rule of thumb given in the textbooks I have seen (I am a Math student and a number of my colleagues have taught financial mathematics courses) has been to assume 3% yearly inflation. Given that, we can now estimate the answer to your question: How much is 14.264 trillion 2007 dollars in 1986 terms? Our calculation is

14.264 trillion 2007 dollars is equal to 14.264 trillion * (1.03)^(-21) = 7.668 trillion 1986 dollars

so it does fall a bit short of the 10.284 trillion mark. However, it does appear that according to these numbers the health care portion of our economy is approximately 3/4 of the entire Soviet economy in 1986.

Of course, more accurate estimates can be obtained by changing the 3% to the actual measured inflation over the period of time. At this site one can see the measured yearly inflation for the desired years. Taking the 21 inflation rates between 1986 and 2006 (including both 1986 and 2006) and multiplying them together, then taking the 21st root of that result, gives the average yearly inflation rate over the time period. I got approximately 3.0393%, close to our original estimate. If we use this closer estimate, the 7.668 trillion 1986 dollars changes slightly to 7.607 trillion dollars.

LA replies:

Thanks for this. So, boiling this down, the U.S. GDP was $4.2 trillion in 1986, and increased to $7.6 trillion in 2007. A huge increase of over 75 percent in just 21 years.

Posted by Lawrence Auster at August 26, 2009 03:38 PM | Send

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