There seems to be one consistent flaw in the thinking of many liberals, particularly politicians, those in the media and academia. They fail in not only the ability to think critically but in their ability to apply what has been called derivational logic. They go from point A—the problem, to point B—the solution, without ever considering unintended consequences or opportunity costs of their decisions. I believe one of the reasons for this tragic flaw in thinking is that so few of them are actually involved in the process of “Doing or MAKING”. I believe at times this is not just a matter of logic and thinking ahead of oneself, but rather a problem of personality and not being able to come to grips with concepts involving choices with consequences—they choose to bury their heads in the sand. Their “feelings” are always a consideration, but reason is seldom applied to simple or complex problems.
Several years ago I was on a panel in Pocatello and we were talking about Medicaid and health care dollar allocation. I mentioned that if there were two pots of money and resources—health care and education what pot should be filled first? The answer from both democrats on the panel—both! Not surprising. Neither had run a business. Both had been employed for many years by taxpayers—one teacher and one State employee. They didn’t understand the concept of choice, or opportunity cost, or unintended consequences. Or risk mitigation.
Milton Freidman supposedly asked graduate level economic students how many transactions had to be completed to produce a #2 lead pencil—ans.62. No one person in his classes came close to understand how much planning and work and manufacturing went into making a pencil. If you ran a pencil factory for 20 years you would find every trick at your disposal to make the best pencil at the cheapest price to compete for customers in the market place. Do you think a government regulator could find a cheaper way to produce pencils or would they promulgate rules and create incentives that would make pencils more expensive and of poorer quality?
Let me talk about 3 simple problems that are before the American people today and demonstrate how short-sited liberal progressive thinking is.
GLOBAL WARMING—Alternative energy solutions often times have greater costs to society than the systems they seek to replace and try to make more earth friendly. There is no cleaner energy source than natural gas. The transporting of natural gas in a pipeline is cheaper, safer, creates fewer carbon emissions (think of the energy consumed by trucks, and trains, and ships just in transporting LNG) and creates itself more efficient energy than wind or solar, when one remembers that every solar or wind facility has to have a secondary source of energy production as part of its operation—almost always a natural gas turbine plant, in order to fulfill it’s real time obligations of suppling energy to the electrical grid. In most States utilities are regulated monopolies. Over the past 20 years they have been allowed by their over-seers to charge customers premium prices if the utility invests in “alternative” energy. But there are no such incentives for reinvesting in the utilities’ infrastructure—so it ages and breaks during times of stress. That is exactly what happened in Texas last week. A utility company operating in a competitive market would invest in a diversity of energy solutions—not just solar and wind—and oh by the way aren’t we lucky in Idaho to have so much cheap energy from hydroelectric and even geothermal and nuclear sources. But the company needs to decide how to allocate resources insuring their long term existence and being able to service customers in the future. That means making choices about preventive maintenance, and R&D and exploration and investment in transport solutions. It is more complicated than making a pencil so government probably can’t complete such a task.
OBAMA CARE—I was an active supporter of the ACA exchanges. I felt there were maybe 300,000-400,000 Idahoans who could be shielded from increasing health care costs and increasing insurance premiums by buying subsidized plans on the exchanges. Nationwide—and the number is close in Idaho, 85% of people buying on the exchange are subsidized. But when we began this project unemployment was at 9.5% and the number of people working part time —sometimes two family members each working part time was twice what it is now. Medicaid and the Exchanges were supposed to help people on the lower margins of income and those who didn’t receive their insurance from their employers or qualify for such insurance. In the new Covid-19 Bill a man with a family of 4 making $240,000/ year qualifies for a $9000 subsidy if he buys insurance on the exchange. This actually incentivizes businesses to use strategies to move employees off their plans and go onto the exchange subsidized plans. And the carriers who see a higher proportion of customers at the upper end of income can continue to increase premiums resulting in increasing payments to providers without any payer downward pressure on costs. And the subsidies at the lower income level will be increasingly financed by tax payers. No derivational thinking here.
MINIMUM WAGE—The CBO has already reported that increasing the minimum wage to $15 would help raise the standard of living of close to a million people—900,000. It would also result in another 1,600,000 people losing their jobs. We know theoretically that putting a floor level on wages paid always decreases the number of workers that employers can hire. We have also been taught empirically this same lesson—remember 6 years ago when restaurants in Seattle, San Francisco and NYC closed because of local minimum wage requirements and many of those employed in the food service business resisted the minimum wage because customers paid less in tips and the overall income to these workers was less. And we all remember the “Minimum wage Pizza” sold in Oakland California. The owner of the Pizzeria offered a $12 dollar regular pizza—if he sold mostly those he would have to lay off half his workers, or a $24 “minimum wage pizza” that the customer could buy allowing the employer to keep all his workers. Out of thousands of pizzas sold —only two people bought a minimum wage pizza. Seems like people want “other people” to pay for the minimum wage—but not themselves.
These three issues point to the problem of allowing people who don’t think about the consequences of their decisions make critical decisions about our lives. Issues like “opportunity costs” and unintended consequences, determine the rules of how we run and pay for our lives. I am thankful in Idaho that we have a part time legislature made up of small business people, ranchers, entrepreneurs and even heads of households who have to make choices in their everyday lives about how to allocate their scarce resources. I am worried that we are seeing “elitist creep” in our legislature and that special interests like IACI and the Teachers Unions and the joint Hospital/Physicians Associations are increasingly exerting too much influence. We never want to claim that we have “the best legislature money can buy”
“Fight Like Hell”