Sunday, July 1, 2012

Obamacare: Facing An Unsolvable Dilemma

There are two conversations/arguments regarding the Obamacare health insurance discussion. The first is whether the program will lead to medical care costing more in the United States. For this portion of the conversation there is no argument. Costs are going to skyrocket. How soon the program will lead to rationing depends on your confidence in the ability of the United States to sell debt moving forward in the future. If you do not understand why it will lead to higher prices then I would recommend a basic review of economics through the book Economics In One Easy Lesson.

The second portion of the argument is whether or not the program is the right decision for Americans based on morality. The program will allow people will pre-existing conditions the ability to receive health care that otherwise would not based on the sick nature of our current insurance structure in America. This will lead to many lives being saved that otherwise would not.

This scope of the conversation looking at this side of the argument moves into the same realm of whether you believe in food stamps, unemployment payments, and helping those that have fallen into troubled times during our current depression. I would say that I obviously wish to help every person possible in our country. I would never want someone to be sick that could be cared for.

The reality of the situation is that we live in a world today where we do not have to make choices on where we spend money and how much we spend in those areas. We have an unlimited amount of money that the US can sell into the debt market. Our treasury bonds yield 0.0% on the short end of  the curve and yields are at all time record lows on the long end. There is currently an unlimited, insatiable, demand for any amount of money that the government is willing to borrow and spend.

I believe that some time over the next 3 to 5 years, and maybe much sooner, this will no longer be the case. I believe that after Europe, the major developed countries (Japan, the UK, and the United States) are going to face a "Greece-like" moment. I try and push myself forward into that world and imagine how decisions will be made when sacrifices will actually have to be made.

For example, a portion of the real estate discussion I have been making for close to four years (a topic that you will not find in any real estate outlook) is that at some point in future the government will not purchase and insure every mortgage in America (as they are today) when that money could be used on health care for a retiring baby boomer population. I believe that people would rather live than have their mortgage rates lower on a new home.

The same goes for student loans, which are almost exclusively funded through the government today. If a portion of that money must be redirected to social security, Obamacare, unemployment payments, or food stamps it will have the exact opposite effect on the education industry as the free money has had on the way up.

Again, if you do not believe the United States will ever have to slow spending then this portion of the conversation does not apply to a real estate decision today. The goal of this site is to project forward into the future based on a likely outcome due to rational economics (such as a 3 minute overview of the balance sheet of the US government).

In the short term the Obamacare program will save lives. In the longer term, if we are unable to finance its massive cost then there will be rationing and it may end up costing lives. There is no good answer to how to deal with the medical issues in America because the country is bankrupt. It is going to be somewhere between bad and very bad in the years ahead.

The following video helps walk through the financial portion of the Obamacare program. It does not focus on the morality portion of saving lives in the short term, which I hope I have emphasized here is equally important.

 

No comments:

Post a Comment