Liz Peek: Obamacare Damage Will Spread Like a Virus
Liz | 03/26 at 05:37 PM
While slicing a skin cancer out of my scalp earlier this week, a surgeon entertained me with his views on the health-care bill. Bottom line: He is buying gold. He has no confidence in the U.S. dollar. The costs of the program, in his view, will be multiples of that projected by the Obama administration. Furthermore, he is confident that the bill will doom Medicare. Already, his reimbursement from Medicare is less than 50% of that received from insurance companies. He is nearly alone among his colleagues in that he still treats those enrolled in Medicare; his specialty brings in mostly older people, and he has been reluctant to drop long-term patients. But – he probably will. His waiting room is teeming, his calendar full weeks in advance; why should he work for less? His conscience is clear; like his co-workers, he treats numerous pro-bono cases referred to him through hospitals.
Democrats are celebrating the passage of their massive health-care bill. As well they should. It takes courage to enact deeply unpopular legislation. It takes even more courage to call the law just passed health-care reform. It is no such thing. In the avalanche of self-congratulation and jubilant editorials, I have seen no one describe this as a good bill. Rather, it became the object of a political contest, and then a political triumph. At the expense, perhaps, of our health-care system. And, possibly, our economy.
I worry about the impact on Medicare, on our hospitals and on businesses. It is, though, the impact on our country’s financial health that is most troubling. The reason that Republicans universally opposed Obamacare is not that they are compassionless meanies, but that they saw this bill as undermining our country’s well-being. The proof of that statement is that Olympia Snowe didn’t vote for the bill. Ms. Snowe is a liberal who wanted to insure all Americans, and who struggled throughout 2009 to make the bill successful. Those damning Republicans for their opposition should pause and consider why Ms. Snowe voted “no.” The reason is that the bill does almost nothing to control the spiraling costs of health care while adding hugely to our medical spending spree, and that is why most Americans oppose it, too.
Bill Gross from Pimco, the nation’s top bond investment group, reckons that the bill will add some $600 billion to our deficit going forward. There have been rumblings that Chinese sales of U.S. Treasuries in recent months reflected their concerns over the health-care bill, and our overall deficit trajectory. These are not emotional responses – we’ve seen plenty of those; these are hardheaded calculations of the bill’s impact on our country’s bank account.
Such Cassandra-like anxieties may seem overly alarmist. After all, over the past year the stock market has surged higher, and interest rates have remained low. The truth is the U.S. looks better off than many other developed countries, and the dollar remains for now the reserve currency of choice. With Greece’s bloated spending pushing that country to the edge of bankruptcy, and Spain, Portugal and Italy facing similar problems and England also dealing with grave budget shortfalls, the Euro and the pound sterling don’t appeal. It is ironic that so many countries are facing financial problems brought on by the sort of legislation that we have just passed, and that so few in Congress are able to connect those dots.
The impact on our struggling manufacturers is just now coming into view. Companies including Caterpillar, Deere & Co. and AK Steel have already taken whopping charges to first-quarter earnings to reflect the anticipated cost of Obamacare. One analyst estimated that, in all, such charges will dock first-quarter income by $4.5 billion. This is not helpful to our turnaround.
If things are so bad, why have we enjoyed a huge run-up in stock prices? I view stock-market gains with a jaundiced (but happy) eye. The sell-off last year in the wake of the financial crisis was extreme, and some bounce-back was inevitable. Also, there are signs of more robust economic activity on many fronts. A more pessimistic view is that a healthy dose of inflation may be the only way to pay off our mounting debts. With that in mind some investors are shifting funds out of fixed-income securities and into equities.
Disappointing Treasury sales this week could accelerate that thinking. As buyers went on strike, interest rates headed higher (and bond prices lower). Fed Chair Bernanke wants to keep rates low, since he considers the recovery still fragile. But as a resolution to Greece’s crisis appeared at hand, foreign investors gave up their Euro-watch and looked harder at the U.S. fiscal situation. Apparently, they were not impressed. The rates on 10-year notes rose to 3.9%, the highest since June 2009. That’s not good news, in that the jump is pushing mortgage rates higher (the 30-year is now above 5%), dimming recovery in the housing market. Considering that the U.S. is lined up to sell $1.6 trillion in securities this year, any rise will be costly.
How can we get out of this mess? What about a diet? Congress may refuse to tighten its enormous belt, but Americans could help our bloated budget by losing weight. Since a huge amount of health-care outlays today stem from the alarming spike in obesity, a reversal in our growing girth could work wonders on our budget. Seriously.
I met a young British chef the other day who is launching a series on ABC tonight called “Jamie Oliver’s Food Revolution,” which aims to improve the eating habits of children. He and his team spent months in Huntington, WV (apparently the unhealthiest, fattest town in the U.S.), producing segments that parody the ghastly pizza and chicken nuggets produced by the local schools, and teaching kids that good food can taste, well, good. He claims that a similar project in the U.K. caused kids to demand that McDonald’s change their menu and chips makers to improve their product. He believes he led children to eat healthier in the U.K., and that he will do the same in the U.S.
Wouldn’t that be something? Just as the country lurches forward with inefficient and costly health-care legislation, wouldn’t it be amazing if we boosted our health by giving up on Doritos and Twinkies, and settled down to veggies and fish? Can it be done? Jamie holds up the decline in smoking as evidence that a country’s habits can in fact change. Maybe he’s right. Therein could lie the answer to bending the cost curve in health care – and some other curves as well.