On Football, Smoking, Soda and Obamacare: There is a spending problem!

Yes Football is a violent sport!
Yes, Football is a violent sport!

After reading a recent spate of articles on how the president should, could, or would ban or regulate football, I started to wonder what my father or grandfather might say? Then I wondered, how we got to this place where things that others choose to do to themselves is now our responsibility to monitor, manage, restrict and pay for?

50 years ago, if we spoke to our parents about the federal government making laws regulating football or restricting people’s access to cigarettes and punitively taxing soda, they would think we had lost our minds.  Clearly,

much has changed since the 1950s and 1960s.

We may choose to believe that we have become more learned and enlightened. We now have more evidence about the dangers of smoking and the problems with soda intake in ourselves and children leading to obesity, diabetes, and other conditions and diseases.  And, to a great extent, the knowledge acquired over the past 50 or 60 years has led us to understand much about the consequences of the dumb and irresponsible things we do!

But, at least in my case, and I suspect many more, Our fathers and grandfathers would have still said the federal government has no place in restricting people’s activities.  Why would they say this?  Because in their view, what you chose to do was your decision and the consequences were your responsibility.  And they were correct!  If you got cancer, or you jumped out of a plane with a parachute, or you got fat, diabetic, and died an early death, that was your problem.

If you were racing in a car, hit a tree, and had a severe spinal cord injury, or if you were playing football without a helmet and got a concussion, or if you smoked and got cancer, it sucked to be you!  People were just as sympathetic and empathetic–maybe even more so.  Churches and associations would take up collections to help you and your family.  Family and friends would have taken turns helping you change your diapers and moved you from your wheelchair to your bed. And, your neighbors might even have contributed to a fund to support you going to an asylum where you could have been taken care of till you died.  But ultimately, while they felt sorry and wanted to help, it was, in the end, your problem.

When did this change?

How is it we moved from the concept that if you got catastrophically ill, it was not my problem; it was yours?  How could we ever think that way?  Well, because it was your problem.  Even with insurance in that period, the impact to others for such problems was minimal in terms of policy costs.  Risky activities were not covered, and many so-called self-inflicted diseases had limited to no coverage.  For the most part, insurance was geared for catastrophe, not normality, and minimal coverage.

So what changed?

In 1964, then-President Johnson, due to rising poverty due to several systemic economic issues and the cost of both the Korean War and the Vietnam War, declared war on poverty.  As part of the battle against poverty, legislation was offered to provide “supplemental” and “temporary” assistance to poor people until they could be raised by the guaranteed “rising economic tide that would surely float all boats”–Medicaid. Additionally, many impoverished older adults had made their money in the 1930s through the 1950s. Due to inflation (loss of buying power), they did not have enough money to pay for their living expenses or insurance. So we needed another “temporary” and “supplemental” program to help them cope –Medicare.

This seemed like a great idea at the time to some, and to others like Wilbur Mills (D and head of the powerful Ways and Means Committee), it was initially seen as a ticket to fiscal disaster.  Mills warned the president that these expansions were unaffordable.  But with a change in the political winds, Mills got the religion and supported Johnson’s efforts publically while privately still warning of the potential financial consequences of these programs were not strictly limited and remains supplemental and temporary.  As is typical, our revisionist memory does not accurately reflect what the programs were originally designed to do.

The concerns Mills was worried about came true, and quickly, like the prior “temporary” and “supplemental” program they extended, Social Security, these programs became permanent and rapidly expanded.  Mills’ predictions of fiscal catastrophe rapidly became true. Shortly after assuming office, President Nixon was faced with the first of these catastrophic predictions.  President Nixon found he did not have enough cash to pay the federal government’s bills.  Due to the international gold standard that established a basis for exchanging dollars into other currencies, he could not print more money without reducing America’s international buying power.  In effect, all printing more money did was create more paper that was proportionately worthless.  More arbitrary cash did nothing as the new cash was divided into the value of the gold reserves, and the dollar was worthless, exactly at the same rate that it was expanded.

This was a big crisis, one we have historically faced many times before.  Nixon followed the prior paths, taken with the backdrop of war, and removed the U.S. dollar from the gold standard.  Now, the treasury could print more money, and the president could pay the nation’s bills.  While initially, the recipients of the cash would realize it was probably worthless, there was no real way to measure the actual devaluation, and some claimed gains could be made.  The government also needed to come up with a method to calculate an increasing value to the economy. They decided the best way to do this was to use the value of U.S.real estate–in effect, mortgage debt.  Crisis averted–the bills got paid, and for the most part, no one was the wiser.

What were the big bills that were draining the money from the Treasury?

Well, Vietnam was a big part and the debt from the Korean War, but the biggest part was the rising cost of Social Security, Medicaid, and Medicare, as well as several other federal programs.  So this new money paid for these services. As these services were paid and became more popular, they became more and more “socialized” within the population. Demand for additional services and coverage increased. Now that the costs were not an apparent problem, politicians–always willing to benefit their constituents out of the goodness of their hearts–reciprocated for their constituent support with an ever-expanding list of covered services and new programs.

We got a program for that!

Hey got diabetes, here’s a program for that; addicted to drugs, we got a program for that; got HIV/AIDS, we got a program for that.  This is not to say there were no legitimate reasons to try to help people in these circumstances.  Clearly, there were very valid reasons!  One of the biggest reasons was that the proliferation of these afflictions and diseases rapidly increased the nation’s costs.  In the short run, the increased spending was not a fiscal problem; we could change some rules, expand the debt, put more money in the economy, making housing prices rise, increasing the dollar value of mortgages, allowing the printing of more money.  Based on Finance, Investment, and Real Estate (FIRE), the new FIRE economy was singing along. The more money we printed, the more money we could theoretically justify!  Economists rationalized why this was a fantastic system, and we all just went along.

According to the prevailing theory, there was no spending problem!  In fact, the more we spent, on credit, the more money we could print, allowing you to spend more money!  So get a credit card, buy a home, and your wages will always catch up because the economy is growing faster than you can spend it–literally!  The government said, hey, spend more, and the economy will grow!  And we all believed it! So that’s what we did.

Football and the other stuff!

OK, so what do football and the other stuff have to do with it?  Well, this easy increase in the ability to have the government pay for everything with little to no sacrifice on any of our parts, and certainly no real consequences for our own decisions and decreasing personal fiscal responsibility, has led us to a place where our expectations have changed!  At least in some part, we now all expect that we will be taken care of by the government if any disaster strikes.  Get flooded — call FEMA, your old and get cancer — Medicare, obese child with diabetes and earn less than some arbitrary amount — Medicaid, infected with HIV/AIDS — Ryan White.  This list can go on and on.  And even if you earn lots of money and have great insurance, now insurance companies are expected to cover everything, with no limits.  And not just things to keep you alive. Some are now expected to cover sex reassignment, breast augmentation, routine visits for medical, dental, vision, and much more.  Again, I am not saying this is bad or that these things aren’t horrible for the people who suffer.  I am not even saying we should, or should not, do them.

Back to football! So today, there is an increasing number of people that believe if you are doing something like drinking soda, or smoking, or football, it is increasing the costs on the rest of us.  And you know, they are correct!  It is increasing the costs on the rest of us.  It is one of the many but by no means the only or even the most significant drivers of the increasing costs of healthcare and spending in the United States.  So now we believe it is ok to restrict your freedoms because your freedoms are costing us money!  But why do they cost us money?

Why are our freedoms now seen as costing us money?

These freedoms now cost us money because we arbitrarily decided over the past 50 or 60 years to accept the fiscal responsibility for things that we do.  We accept them by either requiring the nation to pay for them or by forcing insurance companies, by either government legislation–moved on our behalf, or by our employers who we required to offer these things if they want us to work for them in the first place.  We have come to believe that it must be good for the nation if it is good for me individually.  The problem is, it’s not good for any of us.

Can you show me proof that spending is a problem?

What is the proof?  The proof of this is in our economy.  It is why much of the problems we think we have in HealthCare are driven by our own history, our economy, and our rising false and mythical expectations.  In 1972 we had 500 billion dollars of money in circulation.  Today, we have over $17 trillion.  Our real asset value in the U.S. has only increased by a few trillion, and at the same time, we have spent as a nation $13 trillion more internationally than we have sold.  Our economy collapsed in 1972. The last 40 years have been a shell game, one, for the most part, we have unknowingly played.

Two spending classes in our national economy tie directly, in fact almost point for point, in their rise in cost compared to the rise in newly printed money: healthCare expenditures (including the dominant expenses of Medicare and Medicaid) and average home prices.  The new money has gone to pay for Social Security, Medicare, Medicaid, and others. Housing prices rose because this is the prime engine of the intangible basis for printing the currency in the first place.  If you chart other expenses, they do not come close to this correlation.

So if we want to, we can now begin the process of federalizing control over everything we do.  We can tax soda, Mc Donalds, and 7-11s. We can ban football, car racing, skydiving, mountain climbing, and we can regulate what we eat when we sleep, how we have sex when we go to the doctor, and at what age we die, but it is not going to change the fundamental problem underlying all of it!

First and foremost we have a spending problem! Next, we really need to take a hard look at the path we are on nationally, whether it’s in HealthCare, in defense, and almost every other facet of our lives, and we need to decide what is the role of government and what is our role as individuals.

Our economy collapsed somewhere around 1972.  What do we do now?  In the face of a disaster years ago, it sucked to be you. Today it sucks to be us!

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Tom Loker
Tom Loker

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