INCOMING!

by Karl Denninger, Market Ticker: Here we go....

Were it not for the provision that Pat Toomey, the Pennsylvania Republican, put into the Senate's proposed health care reform, this legislation would be moderately important but hardly momentous. Toomey's provision, however, makes it this century's most significant domestic policy reform.

It required tenacity by Toomey to insert into the bill a gradually arriving, but meaningful, cap on the rate of growth of per-beneficiary Medicaid spending. It is requiring of Toomey and kindred spirits strenuous efforts to keep it there, which reveals the Republican Party's itch to slouch away from its uncomfortable but indispensable role as custodian of realism about arithmetic.

Well, no it doesn't and he isn't -- that is, being realistic about arithmetic.

The argument in this article is that the expansion in cost is all about "mission creep." Nonsense.

The facts are that medical spending has gone from ~3-4% of GDP to nearly 20% and continues to accelerate. This of course means that ultimately it would exceed 100%, which is impossible.

Unfortunately the choking off of economic vitality has already started to take place from this growth in expense and is now threatening to drive the nation into a permanent state of economic funk -- masked, for a short while, by alleged "gains" in health care spend.

You can see this now in the employment report. The one sector that continually gains people at an astounding rate is health care. Yet almost none of those people are actual health care providers -- that is, doctors and nurses. They're all administrators and salespeople, which is great for them (they get a paycheck) but horrible for you (since you pay for it.)

Remember this fundamental truth: Services are all about passing money from one person to another; they actually make nothing.

This means that while you can be a "service-based" economy under those services must be the making of things -- goods!

If the entire economy is predicated on you pumping me full of drugs because I eat like a total jackass and drive my blood sugar and body weight to massive heights what do I produce in actual goods in the economy in order to earn the money to pay you with?

The sad answer to that today is "damn little", and that's where it all comes apart.

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