Author: The Williamson Group

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Wage and Price Freeze

Remember “TARP,” “Too Big to Fail,” “Government Motors,” “pay czar,” the buzzwords of the Bush‐​Obama era? They reflected a disturbing trend toward presidential interference in economic life.

Forty years ago this week, President Richard Nixon showed us just how dangerous unchecked executive power can be to the free‐​enterprise system.

On Aug. 15, 1971, in a nationally televised address, Nixon announced, “I am today ordering a freeze on all prices and wages throughout the United States.”

After a 90‐​day freeze, increases would have to be approved by a “Pay Board” and a “Price Commission,” with an eye toward eventually lifting controls — conveniently, after the 1972 election.

Putting the U.S. economy “into a permanent straitjacket would … stifle the expansion of our free enterprise system,” Nixon said. As President George W. Bush put it in 2008, sometimes you have to “abandon free‐​market principles to save the free‐​market system.”

There was no national emergency in the summer of ’71: unemployment stood at 6 percent, inflation only a point higher than it is now. Yet, after Nixon’s announcement, the markets rallied, the press swooned, and, even though his speech pre‐​empted the popular Western Bonanza, the people loved it, too — 75 percent backed the plan in polls.

As Nobel Prize‐​winning economist Milton Friedman correctly predicted, however, Nixon’s gambit ended “in utter failure and the emergence into the open of the suppressed inflation.” The people would pay the price — but not until after he’d coasted to a landslide re‐​election in 1972 over Democratic Sen. George McGovern.

By the time Nixon reimposed a temporary freeze in June 1973, Daniel Yergin and Joseph Stanislaw explain in The Commanding Heights: The Battle for the World Economy, it was obvious that price controls didn’t work: “Ranchers stopped shipping their cattle to the market, farmers drowned their chickens, and consumers emptied the shelves of supermarkets.”

Several lessons from Nixon’s folly remain highly relevant today.

First, it’s usually Congress that lays the foundation for an imperial presidency with unconstitutional delegations of authority to the executive branch. The Economic Stabilization Act of 1970 gave Nixon legislative cover for his actions.

The act was “a political dare,” according to top Nixon official George Shultz — the Democrats thought Nixon wouldn’t use the powers they’d granted him, but he called their bluff.

Second, the damage presidents do with economic powers they shouldn’t have can take years to repair. Price hikes from the 1973 Arab oil embargo made it politically difficult to unwind controls on gasoline, which led to the gas lines of the late 1970s.

Third, the episode shows the enduring relevance of cartoonist Walt Kelly’s Pogo Principle: “We have met the enemy and he is us.” As noted, the freeze was overwhelmingly popular. “Bold” presidential action on the economy often is, even when “just stand there — don’t do something!” would be wiser counsel.

In the recent de–––bt‐​limit fight, for example, liberal Democrats who’d spent eight years railing against Bush’s executive unilateralism begged Obama to break the law and unilaterally raise the debt ceiling, using a fig leaf of a constitutional argument based on the 14th Amendment.

Occasionally, though, we learn something from our mistakes. As Shultz told Nixon in 1973, at least the debacle had convinced everyone “that wage‐​price controls are not the answer.”

Ironically, Nixon’s actions also helped galvanize an emerging libertarian movement opposed to the bipartisan welfare‐​warfare state. “I remember the day very clearly,” Rep. Ron Paul, R‑Texas, recalled in 2001, saying the events of Aug. 15, 1971, drove the reluctant young obstetrician into politics.

For years, Paul waged a one‐​man war against economic nostrums and presidential command and control. Lately, though — with the rise of the Tea Party and his strong showing in the Ames straw poll — he’s not looking so lonely anymore.

Source: https://www.cato.org/commentary/remembering-nixons-wage-price-controls#

Questions

The content delves into the topic of President Richard Nixon’s imposition of wage and price controls in the United States in 1971 and the consequences that followed. It highlights the dangers of unchecked executive power and draws lessons that remain relevant today. The post provides historical context and a concise analysis of the impact of Nixon’s actions.

Let me know your thoughts…

1. Clarify the connection between Nixon’s actions and the current political landscape to make the relevance more explicit.

2. Provide additional examples or evidence to support the claim that Congress often contributes to the problem of an imperial presidency.

3. Expand on the long-term effects of Nixon’s wage and price controls, including their impact on the public perception of government intervention in the economy.

4. Discuss the libertarian movement’s response to and influence on economic policy in more detail, emphasizing its relevance in today’s political climate.

5. Consider including alternative viewpoints or counterarguments to provide a more balanced analysis of the topic.


Update – Medicare Advantage – No No

Medicare Advantage (MA) has received mixed reviews after 25 years of implementation. While it may benefit employers, unions, and states with retiree obligations, it has raised concerns for seniors, doctors, and the government. Seniors may receive worse care under MA compared to traditional Medicare, doctors face cumbersome prior authorizations, and the federal government spends more on MA per capita than traditional Medicare. Additionally, several major insurance companies offering MA plans are involved in lawsuits.

Medicare Advantage began life as a brilliant idea: a public-private partnership to keep older people healthier and reduce costs.

At the time in 1992, both President George H.W. Bush and his challenger, Bill Clinton, supported it. An editorial in The New York Times declared, “The debate over health care reform is over. Managed competition has won.” What finally emerged in 1997 — Medicare Choice, now known as Medicare Advantage — was hailed as a win-win-win for patients, providers, and payers.

Twenty-five years later, a different consensus is clear: Medicare Advantage (MA) is a failure for seniors, who receive worse care than they do under traditional Medicare; for doctors, who must negotiate costly and dangerous prior authorizations for their patients; and for the federal government, which spends more per capita on MA than on traditional Medicare. Further, eight of the ten largest insurance companies offering Medicare Advantage plans are currently defendants in False Claims Act lawsuits brought by whistleblowers or the Department of Justice.

But it’s been a winner for employers, unions, and states that have pension and health care obligations to their retirees. They push hard to get people off traditional Medicare and onto MA plans. That’s because retiree benefits often include supplemental or Medigap policies that former employers pay for, while Medicare Advantage plans are almost entirely paid for by the federal government. Medicare Advantage plans are also winners for the private insurance companies that offer and administer them. Their gross margins are typically two to three times greater than other insurance plans.

DO NOT CHOOSE MEDICARE ADVANTAGE

Evidence of Coverage (EOC) | Medicare

What is it?

If you’re in a Medicare Plan, your plan will send you an “Evidence of Coverage” (EOC) each year, usually in the fall. The EOC gives you details about what the plan covers, how much you pay, and more.

When should I get it?

September

Who sends it?

Your plan

What should I do if I get this notice?

  • Review any changes to decide whether the plan will continue to meet your needs in the next year. 
  • If you don’t get this important document, contact your plan.

Benefits Provided by Medicare Advantage

Medicare Advantage, also known as Part C, is offered by private insurance companies. It was introduced in the 1980s to provide competition and choice. Seniors may find that these private plans offer convenience, a wider range of benefits, and lower out-of-pocket costs than Original Medicare. More than 3,100 Medicare Advantage plans are available nationwide as of 2020, with the average beneficiary being able to choose from 28 different plans.

CONS of Medicare Advantage

  • You are always responsible for copayments and coinsurances, and sometimes even for deductibles. Therefore, the cost could be quite high. There is an out-of-pocket limit – $8,300/year.
  • Your choice of doctors/hospitals is limited by the provider network within a specific geographic area. Members are required to pay an increased cost, sometimes up to the full price, for services outside the provider network.
  • Medicare providers may not always accept Medicare Advantage plans so your choices may be limited. Some doctors and hospitals do not participate in any Medicare Advantage plans and others only in a selected few.
  • Many plans require referrals for specialists and other services.
  • Medicare Advantage plans may change every year. Such changes may affect your premium, deductibles, copayments/coinsurances, and the scope of extra services.
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