An economic recovery forecast

The Economist makes its prediction for the shape of the economic recovery:

A gloomy U with a long, flat bottom of weak growth is the likeliest shape of the next few years.

They also have a discussion about the housing market here.

The cause of America's high health care costs

Harvard economist and John Bates Clark Medal-winner Martin Feldstein identifies the cause of America's high health care costs:

Budget considerations aside, health-economics experts agree that private health spending is too high because our tax rules lead to the wrong kind of insurance. Under existing law, employer payments for health insurance are deductible by the employer but are not included in the taxable income of the employee. While an extra $100 paid to someone who earns $45,000 a year will provide only about $60 of after-tax spendable cash, the employer could instead use that $100 to pay $100 of health-insurance premiums for that same individual. It is therefore not surprising that employers and employees have opted for very generous health insurance with very low copayment rates.

Since a typical 20% copayment rate means that an extra dollar of health services costs the patient only 20 cents at the time of care, patients and their doctors opt for excessive tests and other inappropriately expensive forms of care. The evidence on health-care demand implies that the current tax rules raise private health-care spending by as much as 35%.

The best solution to this problem of private overconsumption of health services would be to eliminate the tax rule that is causing the excessive insurance and the resulting rise in health spending. Alternatively, Congress could strengthen the incentives in the existing law for health savings accounts with high insurance copayments. Either way, the result would be more cost-conscious behavior that would lower health-care spending.

I have previously made the case for greater use of health savings accounts here.

Why Singapore's health care system beats ObamaCare

Singapore's health care system is entirely different than anything the Democrats are trying to do. Singapore's health care system is one libertarians should love, because people there pay for their own health care out of their own pocket. Singapore's health care system is basically a system of health savings accounts for everyone, combined with catastrophic (high-deductible) health insurance. There is also free health care for the poor, analogous to Medicaid in the U.S.

Why is Singapore's health care system superior to ObamaCare? Let's compare Singapore to the Democratic Party ideal (Western Europe and Canada).

Singaporeans live longer than people in the Western European countries whose health care systems the Democrats want to copy:


Singapore's health care system costs less than those in the Western European countries that the Democrats want to copy:


Government spending on health care is lower in Singapore than in the U.S. This is something the small-government crowd should love and the ObamaCare crowd should hate:


While some Democrats are trying to abolish health savings accounts in the U.S. (the Republicans introduced them a few years ago, but they are rarely used), Singapore is evidence that universal health savings accounts are superior to any kind of "public option" or "single payer system".

The reason health savings accounts are so successful is because they get supply and demand working the way they should. This doesn't occur when someone else (e.g. an insurance company or the government) pays the bill.

It is a false choice to believe that the only health care options we have are either big-government or the status quo. Universal health savings accounts provide a third alternative.

Data source.

To learn more about Singapore's health care system, click here.

Update: The Washington Post has an article with more details about the Singaporean health care system. Also according to Wikipedia, "Singapore was ranked 6th in the World Health Organization's ranking of the world's health systems in the year 2000."

A better health care system than ObamaCare

I recommend this editorial from the CEO and co-founder of Whole Foods: The Whole Foods Alternative to ObamaCare.

Here's a summary:

• Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs).
• Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits.
• Repeal all state laws which prevent insurance companies from competing across state lines.
• Repeal government mandates regarding what insurance companies must cover.
• Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year.
• Make costs transparent so that consumers understand what health-care treatments cost.
• Enact Medicare reform.
• Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren't covered by Medicare, Medicaid or the State Children's Health Insurance Program.

Recession is ending; may be over

The number of new job losses continues to decline. Compare these U.S. Bureau of Labor Statistics job loss numbers with the numbers from Automatic Data Processing, which I published on Wednesday.


The unemployment rate is no longer spiking. It may drift upward at a slower pace if we have a jobless recovery, but the end of a sharp upward spike has historically been a sure sign of the end of a recession.


Weekly initial unemployment insurance claims peaked about a month ago. This graph shows the year-over-year percentage change for emphasis.


Finally, the bulk of the economic stimulus package is yet to be spent. That's a lot of money that will be dumped into the economy over the next year or two.

July 2009 ADP employment report numbers

Source: Automatic Data Processing, Inc.

It looks like the recession is slowly ending, but it will still take a while. Note that job gains need to be positive just to keep up with population growth. The government's numbers come out on Friday.