Record inflation caused by the Biden Administration’s mismanagement of the U.S. economy will leave many low-income parents feeling like they’ve been visited by The Grinch come Christmas. Recent polling by the Associated Press found that six out of every ten Americans believe gift prices are higher than usual this year.
The same survey found nearly half of all families with an annual income of less than $50,000 felt pushed to cut back on holiday shopping by as much as 20 percent, according to an estimate furnished by America’s Research Group.
The survey results are an anecdotal affirmation of a study recently released by Penn-Wharton that found the inflation that has returned with such vigor during the Biden presidency after being marginal over the last several decades has reduced the average American family’s purchasing power by as much as $3,500.
The politicians who are struggling to find a way to resolve the mounting inflation crisis have become the object of ridicule in recent days due to their incompetence. Consider this observation from noted economist Richard Rahn, head of the Institute for Global Economic Growth:
The folks in government want you to know that even though many prices such as oil are up 45 percent and food up 22 percent over the last year, there are other very important products such as toys, whose prices have been falling, down 27 percent over the past year. So, if you buy more toys and less gasoline and food, your real income in terms of purchasing power will remain the same.
Inflation is the canary in the coal mine. It’s a leading indicator that rough seas are ahead for the economy. The International Monetary Fund reports that, among the top 35 developed nations, the United States now has the highest level of inflation. The National Federation of Independent Business recently announced a “historically high number” of small businesses are saying the general economic situation is forcing them to raise prices.
President Biden has been criticized repeatedly for failing to take the issue of inflation seriously. His proposals to continue the orgy of spending and borrowing that began under his predecessor during the COVID pandemic have made matters worse. For example, his so-called stimulus package contributed, according to the San Francisco Federal Reserve, to the rise in inflation while making the labor shortage worse.
Federal Reserve officials have been warning quietly since October of the growing risks inflation poses to the post-lockdown recovery. Numerous studies have shown the states that re-opened quickly – or never shut down at all – doing much better economically and are recreating more jobs than those that locked down and remained that way for much of the year.
Unfortunately for the president, the future is not rosy and bright. According to a recent release from the Gallup organization, the outlook of investors “has worsened” in recent months and they are far less bullish on the prospects for economic growth than they were in the first half of 2021.
“The overall effect is a decline in the Gallup Investor Optimism Index,” the firm reported, “from +39 in the prior survey (conducted in the second quarter) to +10 in the fourth,” putting it close to its lowest point since the pandemic began.
Rahn, among other economists, remains pessimistic. In a recent column, he went on at length regarding the failure of Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen to realize inflation was not “transitory,” especially with consumer prices are now rising at an almost 7 percent annual rate and producer prices at a 10 percent.
“They would not have been surprised if they had been reading this column over the past year, looking over the WSJ editorial page or watching Larry Kudlow, Steve Moore and Art Laffer on Fox,” he wrote. “The Fed has several hundred economists working for it (many from the “best schools”), yet its forecast record over the last couple of decades is far worse than most of its private sector peers.”
Too much money leads to inflation. The Biden Administration wants to print and borrow as much as it can as part of its now moribund Build Back Better program. If it continues its current path, there will be little or nothing to build back, better or otherwise.
Raising concern “about the direction the health care policy debate is moving” – particularly among conservative lawmakers – the National Center for Public Policy Research has joined with more than 70 other conservative and free-market organizations to warn Congress about the dangers of price fixing.
In trying to remedy the issue of surprise medical bills for out-of-network emergency treatment, and insurers balking at covering all of such costs, some typically conservative politicians are favoring proposals to essentially enact price controls on these health care services. This would prohibit doctors and hospitals from setting their own rates and potentially make them operate at a loss.
Senator Rand Paul has explained that this could compromise the quality of American health care by driving people out of the medical field. “If you fix the price that ER doctors work at,” he said, “you will get a shortage.” He suggested that what has happened to the economy in Venezuela could happen in the United States as a result of such changes to the marketplace.
In a letter to conservative lawmakers on Capitol Hill, the National Center and others note:
[W]hat is troubling is how often otherwise right-of-center policymakers are resorting to one of the key pillars of the Medicare for All playbook – government imposed price controls. Whether it is called price fixing, rate setting, subsidy capping or inflation capping, government price controls have wormed their way into the healthcare reform plans of too many of our friends in Washington.
The National Center is joined on the letter by organizations including Americans for Tax Reform, the Competitive Enterprise Institute, Frontiers of Freedom, the Discovery Institute, the Institute for Policy Innovation and Eagle Forum.
The coalition letter concludes:
This was a bad idea a half century ago with gasoline line rationing, and it’s a bad idea today in health care. Something can only be affordable if it’s available to buy in the first place.
To read the entire letter and see all of its signers, click here.
House Speaker Nancy Pelosi is considering a monumental change to Medicare — and believes that President Donald Trump might support her plan.
Her big idea? Binding arbitration — a method that empowers government-appointed “arbitrators” to dictate the price of new medications and treatments. She hopes it’ll lower drug spending.
That would represent an enormous change from the status quo. Right now, drug makers negotiate directly with private insurers and healthcare providers.
Arbitration is just a fig leaf for government price controls. Arbitrators are supposed to be unbiased. But they’d likely always side with the government officials who appointed them — and set prices well below fair-market value. Like all price controls, arbitration would discourage medical innovation.
Under Medicare, drug coverage is broken into two parts. Medicare Part B covers potent medicines, like chemo- and immunotherapies, that physicians administer in hospitals and doctor’s offices. Medicare Part D covers prescription drugs that patients can pick up at the pharmacy.
For both programs, drug prices are determined through negotiations between drug makers and private payers, like hospitals or insurers.
In a binding arbitration system, if Medicare officials aren’t satisfied with those negotiated prices, they could appoint an arbitrator to do their bidding. Medicare officials would explain to arbitrators why they feel a lower price is justified. Pharmaceutical companies would justify their own suggested price.
Arbitrators would then choose a legally binding price. And their decision wouldn’t be limited to the two proposals on offer.
This type of dispute resolution is also called “baseball arbitration.” Baseball teams are well known for bringing in neutral arbitrators to resolve contract disputes. But Pelosi’s arbitration plan shouldn’t be compared to the big leagues, as the government would run the entire show. Government officials would get to pick the arbitrators — and would almost certainly choose ideologues who agree with them. So the “negotiation” would function identically to price controls.
Price controls always stifle innovation and harm patients in the long run.
Drug development is a risky business. It takes about $2.6 billion and between 10 and 12 years, on average, to create just one new drug. Around 90 percent of medicines never make it past clinical trials.
Investors are willing to take such financial risks on the off chance their drug succeeds and is profitable. Price controls eliminate that potential by making it harder for companies to recoup their R&D expenses. No investor would risk her capital knowing the government could undervalue her discoveries.
Just look at what price controls did to Europe. In the 1970s, European companies made more than half of the world’s new drugs. Then governments across Europe began to implement various price control schemes over the next 10 years. European countries develop less than 33 percent of new drugs today.
The United States, on the other hand, is the global leader in drug development — and has done so for over three decades. Because our healthcare system values drugs fairly, drug innovators are eager to research and develop drugs stateside. In fact, America’s biopharmaceutical industry dedicated close to $90 billion in R&D efforts in 2016.
All that investment has paid off, too. In the United States, researchers are developing roughly 4,000 new medicines targeting a range of diseases — including potential cures to Alzheimer’s, cancer, and diabetes.
If binding arbitration takes off, Americans may never benefit from these potential treatments. Instead, patients would be left at the mercy of diseases for which there are currently no cures.
Binding arbitration doesn’t deserve President Trump’s support — or the support of Democrats. Letting the government set drug prices would hinder future medical advances.
“Pretty soon if a man bought a sick horse or a leaky boat, he’d say it ‘wasn’t worth a continental.’ It was a way of describing something as worthless.”
by Thomas Fleming
“Welcome to the Continental Congress.”
“I’m not sure what you mean by that, Mr. President.”
“I mean we’re on our way to a visit to the people who almost lost the American Revolution — if we continue to try to maintain the illusion that our money has any value when the interest rate for borrowing it is zero and we try to solve our mounting debt problems by printing it by the billions.” Continue reading