This morning, as I was flipping around to various cable news channels before I took off for work, I managed to catch a Democrat Congressman discussing some of the details of the Baucus plan. I don't remember his name and I'm fairly certain that he's not a prominent member. His defense of various sections of the bill was pretty deplorable at best, but there was one unquestioned explanation that left me astounded.
There's a part of this bill, discounting the possibility of it being removed, that would essentially force people to buy medical insurance. They would do so by leveling a somewhat large tax against anyone who refuses to buy medical insurance. Now, this is obviously a pretty horrible idea on the grounds that the federal government is essentially forcing citizens to purchase something. Most of us would have some curiousity regarding the ethical nature of a law that imposed a heavy tax on us for not buying a computer, yet somehow we think it's just fine to do that with medical insurance. However, this isn't even what surprised me. What really got me going is when he tried to spin out some tautology claiming that one of the reasons insurance is so expensive, and why this plan would cut down on its expense, is that there aren't enough people purchasing insurance and that if we forced them to do so then premiums would come down.
Now, I'm not sure if I was more caught of guard by his absurd and misleading assertion or the fact that none of the idiots on Fox and Friends had the brain power to be critical of that statement. And while I think he could ALMOST get away with saying something that stupid within the context of the bill itself and the subsequent government corruption of the health care market, I just think it's absolutely crazy that he got away with saying something that stupid as if it was matter of fact.
As is often the case in economics, breaking things down into a simple analogy often helps people understand a more complicated issue; Let's say we're observing a company that sells apples. They currently have the capacity to keep about 1,000 apples in stock for the roughly 1,000 customers they get on average daily. All things being equal, what would be the expected effect, on the price of any given apple, if we were to suddenly flood that market with an additional 200 customers a day? Would the apples become cheaper?
The obvious answer, in the short run, is most certainly "No." If you greatly increase the demand for apples by 200 in a market structure that currently supports 1000 apple purchases, the immediate effect, you would think, would be an INCREASE in prices. Now, in the long run, given that such a business would be allowed to earn a profit, if it's OK with Michael Moore, and reinvest in his or her capital structure in such a way that would allow them to have the capacity to provide 200 more apples a day, you would expect that prices may eventually return to their previous nominal value. But you certainly wouldn't automatically expect that greatly increasing the demand for something would simply yield lower prices. So why does the Congressman proffer such a notion?
Well, I can't presume to speak for him, but I think he's able to get away with his ludicrous claim because he's not giving you all the facts. Let's take a look at another apple company in which a third party is allowed to arbitrarily place restrictions on them. The company is told that they cannot deny apples to starving people who do not have the money to pay full price for them. The apple company warns this third party that if they are forced to do this, then many of their customers would simply neglect to buy apples until they are starving, at which point they would be forced to give them apples at almost no cost. And they would also warn that this would mean they would have to raise the price of apples for customers who actually purchase them in order to cover their loss. Acknowledging this economic reality, the third party holds a town meeting and tells all in attendance that if they pass a law forcing EVERYONE in the town to at least purchase one apple a day from the store, then prices would not continue to rise as much. Is the third party correct?
In the context of the situation, for which the third party is responsible in the first place, yes. It is true that if everyone in town was forced to purchase an apple, then the apple company could spread the losses from the apples they are forced to give away across a larger amount of apples, easing the price increase on a per apple basis. But is this a normal market phenomenon? Absolutely not. The key here is that this is only the case because the third party is forcing the company to give apples away. The third party appears to the town people as an institution that is simply concerned about the rising price of apples, but the uninformed citizens may be completely ignorant of the fact that such a problem only exists if they first place onerous regulations on that particular business.
This is precisely analogous to the Congressman's explanation. He blindly asserts, incredibly, that increases in demand will lower the price of a good or service. And yet what he's not telling you is that this is entirely predicated on the fact that the government is going to start forcing the health insurance industry to accept customers with pre-existing conditions without setting a realistic premium. If you have AIDS or cancer and demand that an insurance company sell you a $200 a month insurance plan that covers those ailments, then it's clear you're not asking for "insurance" but rather you're just asking them to eat the cost of your health care. If the government forces insurance companies to do this, then there is a high probability that many people will simply wait until they have a condition that demands coverage to purchase it...leaving a smaller actual customer base to cover the losses. So now the government gets to assert that forcing everyone to purchase insurance plans will help stifle (yet, not completely stop) the increased premiums they have brought about with their new mandates on the insurance industry.
It's really amazing to me that politicians get away with saying some of the things they do. Every once in a while we hold their feet to the fire, albeit often over something trivial, in my view. But why does it seem like no one directly challenges them when they make some of these absolutely backwards and asinine statements? Is it because the American people feel that they aren't as smart as the politicians perhaps? Is it that people just don't pay attention to these things? I'm really not sure. But when you do catch them saying something incredibly outlandish, you start to ask yourself, "Is this person a cunning liar or just another idiot?" I'm inclined to agree with Walter Block as I contend, "Why can't they be both?" Of that I can't be sure. But what I am certain of is that they are often simply wrong.