Economic Ignorance
A New York Times article this morning entitled "Obama set to warn insurers over "rate gouging,'" included the following, which is one of the most astonishing things I've seen in print in -- oh, days, at least:
The White House is conceerned that health insurers will blame the new law for increases in premiums that are intended to maximize profits rather than covering claims.
Never mind the shoddy grammar -- did someone at the White House really say this, or is the Times just being factually sloppy as well? Dudes, the whole point of a for-profit corporation is to "maximize profits." This sort of statement reflects either mind-numbing ignorance of how microeconomics actually work in a (relatively) free economy -- inexcusable at either the Times or the White House -- or an inherent hostility to the "free" in free markets and an implicit belief that "capitalism" is fine as long as it's managed by the State, which alone has the wisdom to determine how much profit is enough.
I'd love to see this at a press conference or on a Sunday morning talk show: "Mr. President, do you believe that private enterprises operating legally in competitive markets here in the U.S. should be free to try to maximize their earnings? Yes or no?"
By the way, over the past three years at the five largest publicly-traded health insurers, an average of just under 5 cents of every dollar of premiums has gone to profits -- pretty average for corporate America, and hardly evidence of the sort of rapaciousness that cries out for control from the firm hand of Washington.
- Comment (6)
- · Quote
- · UnfollowFollow (1)
Comments :
May '10
Re: Economic Ignorance
I have posed that question to some of my leftward leaning friends. Unfortunately, they answer no. They believe things like healthcare and energy should be public utilities. That is the motivation behind the single payer system. You've already heard Senator Obama admit that he'd prefer a single payer system if he could start from scratch. This is a political battle we simply must win by convincing the public, because the President will not be embarrassed by that question.
Jun '10
Re: Economic Ignorance
Why does the price of anything change? Why are tomatoes cheap in Summer and expensive in Winter? Duh....
May '10
Re: Economic Ignorance
Greed.
Re: Economic Ignorance
Steve, bravo for catching that. It's so easy to skip over those revealing phrases -- which is precisely the problem. When such phrases get repeated in the media, it creates (or reinforces?) the notion that there's something dodgy about "maximizing profits.
Behind the Administration's non-stop hectoring of the private sector, there lies a basic assault on shareholder capitalism. I suspect the Obama braintrust is populated by people who want so-called "stakeholder capitalism," in which a company has to balance profit maximization with some fuzzy, undefined responsibility to its community. This notion is a blank check to the plaintiff's bar.
May '10
Re: Economic Ignorance
Adam, "stakeholder capitalism" is a powerful idea that infringes on the very concept of property rights. The really dangerous part of it is the "undefined responsibility to the community" because it will be defined whimsically by whoever is in power. This gives the government the power to pick winners rather than the consumers and the market.
Some things are just too important to be left up to the free market, you know.
May '10
Re: Economic Ignorance
Today Senator Harkin told a hearing room that 30% operating margins were inappropriate for for-profit colleges, but 15% he could live with. In commenting on the relative proportionate expense on faculty salaries vs. marketing costs vs. CEO salaries, Al Franken told the same room of his desire to fix the imbalances. He said, "We're Senators. This is what we're here to do!"