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All right, y'all.
Welcome to the show.
I'm Scott Horton.
Check out the full archives of my interviews at scotthorton.org.
Almost 4,500 of them now, going back to 2003.
And check out the Libertarian Institute at libertarianinstitute.org.
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And I apologize in advance for how I talk to you on Twitter, I'm a terrible person.
Okay.
Introducing our good friend Bob Murphy.
He is from the Ludwig von Mises Institute, a senior fellow there.
And he keeps his own website, freeadviceatconsultingbyrpm.com.
And here he is, Research Assistant Professor at the Free Market Institute at Texas Tech University.
You're a Texan now.
Welcome back to the show, Bob.
How's it going?
Hey, Scott.
Glad to be here.
Things are great.
That's cool, man.
You know, it sounds like you used to live far away in some Yankee state, like Tennessee or something, right?
Well, I was born in New York, so that was worse, right?
But then, yeah.
Tennessee for a while, and yes, now I've been in Texas coming up on two years.
I know that might make the Tennessee folk mad, but they are Yankees compared to a Texan, you know, way down here.
Anyway.
Hey, man.
So, I want to ask you questions about, you know, the economy and stuff like that.
Okay, sure thing.
Yeah, and this health care reform or health insurance reform stuff, too.
There's a lot that I think the narrative people are hearing is completely distorted.
You will be shocked to hear.
Yeah.
Well, you know what?
I don't even know anything about the narrative, because I'm trying to wrap up this book about Afghanistan.
I'm not even keeping up with Syria news very well anymore.
So, first of all, I guess what we all know is Obama passed Obamacare, and now the Republicans are doing something about that, so you pick up the question from there, wherever you want to go.
Let me know.
Yeah, that's the thing.
And so, by no means, with a lot of this stuff, you know, it might come off like I'm defending Trump or the Republican.
I'm not.
It's just the way the Democrats are attacking them is completely dishonest, and it leads people to believe in the efficacy of bigger government, so that's the purpose of me trying to correct this narrative.
So Obamacare, you know, the Affordable Care Act, that was falling apart.
Major insurers were losing millions of dollars.
They were pulling out.
And so that was not a sustainable system, and so then, now the Republicans are coming along.
Trump completely made promises that were impossible to keep during the campaign, and I think that's clearly a case where he literally just didn't even know enough about it, and so he was saying, oh yeah, we'll keep everybody's universal coverage, and we're just going to make it better and cheaper.
I think he had this notion that, oh, well, I'll just get in there with my guys, and we'll look at it, and we'll find some cost savings, and how hard can it be, and he really didn't know what he was even talking about.
So clearly, I'll stipulate all that, but in particular, the one thing, if your listeners get nothing else out of this that I want to make sure they understand is the way the Democrats now are complaining about the Republicans' proposals to reform or overhaul or repeal and replace, depending on who you're catering to, Obamacare, is they're saying this bill is going to literally kill people, and they'll come up with estimates as to how many people are going to literally die because of partially taking away the effects of Obamacare.
So on that, Oren Kass from the Manhattan Institute has a fantastic takedown of that claim, and so just make sure your listeners get this.
If you look at the actual mortality data, right, so this isn't theoretical.
You can go and look and see, okay, how many people died in the U.S. before Obamacare and after, and the provisions fully kicked in in 2014, and you can look, and mortality rates adjusting for age and everything, you know, this is the way, like, official government figures and stuff, this isn't, you know, some right-wing think tank's numbers.
These are the standard numbers.
Mortality rates went up.
And furthermore, you can say, all right, and Oren says, okay, now maybe that's not because of Obamacare.
That could have been, you know, opioid epidemic or whatever, so let's be fair.
If you break down the numbers and look at the states that expanded Medicaid coverage, because you may, I don't know if this was on your radar, Scott, but that was one of the controversies, is that, like, the Republican states with governors, some of them refused to accept the Medicaid expansion that was, you know, an option under the Affordable Care Act, whereas other states were like, oh, yeah, we'll take your money and go ahead and expand Medicaid.
So if anything, you know, clearly the mechanism by which Obamacare was supposed to help people was by expanding Medicaid coverage.
And that was primarily why so many people were, you know, got insurance who didn't have it before.
The states that expanded Medicaid coverage had a worse, you know, effect on their mortality rates than the states that refused to do so, okay?
So again, in overall absolute terms, mortality reversed.
Normally, mortality gets better year after year.
Now all of a sudden it flipped when Obamacare fully kicks in nationwide.
And then again, if you break it down by states, the ones that took the money and expanded their Medicaid coverage had worse mortality outcomes relative to the states that didn't.
So all right.
Well, wait a minute.
Let me stop right there for just a second to say that, you know, damn lies and statistics and all this kind of stuff.
So it does seem counterintuitive if the poorest people who absolutely could not get insurance all of a sudden now they can go see their doctor, but it's a Medicaid doctor.
So they kill them or what?
What's the cause and effect there?
Let me I'll make I'll come in a second, but let me just say one thing on this work because you're right, Scott.
So I was skeptical myself, and so I wanted to see, well, what does the other side say?
You know, people who are for the Affordable Care Act, how do they?
And so I'm looking at this thing from the Kaiser Family Foundation, which is totally pro-ACA.
They've been there for years and they have a study, same sort of thing.
And this is, you know, the whole point of this study is to say how great the ACA was.
And they talk about key findings and they say how coverage went up across, you know, vulnerable groups.
And then they have a bullet point called access to care, utilization, affordability, and health outcomes.
So I thought, OK, here's where we're going to get into.
I want to see, do they agree with.
So they say most research demonstrates that Medicaid expansion positively impacts access to care, utilization of services, affordability of care and financial security among low income population.
OK, so those are all about, you know, getting insurance, financial security.
OK, but technically that doesn't say whether their health went up or down.
And then here's the one sentence they had.
This is in their executive summary.
Studies have also shown improved self-reported health following expansion, but additional research is needed to determine effects on health outcomes.
OK, so even the pro-ACA thing, the evidence they gave was to say, yeah, if you survey people and say, how did you think you're better off, they'll say yes, but they don't actually have any hard numbers.
So to answer your question, Scott, I'm not, I don't know, I haven't delved into the numbers enough to know whether it's saying the people who didn't have insurance before now get it are worse off or saying among the population as a whole in this state, if you start giving care to some with strained resources, does that reduce, you know, the overall efficacy?
So people who had it before now get worse.
So I'm saying so it's not saying the people who are getting insurance necessarily worse off.
I'm just saying the states that expanded Medicaid coverage mortality in that state went up relative to states that didn't.
All right.
Now, but like you said before, there could be other reasons involved to write the opiates or whatever, different variables that aren't necessarily being taken into account or what?
Well, and also they're subsidized coverage, not just Medicaid.
There are a lot of people who have cheaper insurance now who are also then flooding the market as consumers and they're not enough doctors kind of thing.
Is that something you think?
Well, right.
Yeah.
So the two things you brought there.
One, again, I realize it's, you know, it's kind of like saying, you know, if the government comes along and starts handing out food or something and then, you know, more people are starving, like, you know, as a libertarian or something, you might object to the principle of redistribution of income.
But that seems counterintuitive.
You hand out more food.
But on the other hand, you say, well, is it really so implausible to say if, you know, government schooling actually makes people less educated, especially the longer you let that system run?
And I say, oh, I don't know.
And you know, the V.A. hospitals, that's government run health care.
You know, is it so counterintuitive to think that's actually hurting people to put them through that system?
The one thing, too, about the opioids and all that, again, just make sure, though, you get that could explain why, you know, mortality went up in the nation as a whole, reversing a decades long trend, because that crisis happened to hit just when Obamacare happened to kick in.
And it's not really Obamacare's fault.
But what would be kind of odd is that the opioid crisis hits more heavily just in the states that expanded Medicaid coverage and not so much in the other states.
You know, that's actually kind of like the opposite of the standard narrative, that it's the opioids crisis places that we're all rednecks voting for Trump.
So is it pretty much obvious then that the problem here is you have all new patients, but you don't have a correlated expansion of doctors and nurses and health care companies to take care of them.
So people are dying in the waiting room.
Is that it?
I think that could be part of it.
So I confess, Scott, you're right.
I haven't.
You know, I'm just looting right now, diving in this literature and stuff.
So I don't have I first want to make sure the numbers are right and everything.
And like I said, my first line of defense was to go look at the other side to see, you know, are they saying different numbers?
And so far they haven't.
They've just been saying different things like, well, if you ask people, are you healthier?
They say yes.
You know, that kind of stuff.
Well, I mean, just like with anything, correlations can hide causations.
You know, not only might they not be necessarily related in the way you think, but there might be the opposite of that.
You find out later.
Right.
Sure.
But but again, though, I'm just saying for the people who are claiming because there's a lot of people, a lot of studies that were coming out saying, oh, statistical analysis claims that the Affordable Care Act saved anywhere from, you know, such and such thousand per thousand lives per year.
And so, you know, a lot of people who are following us thought like, oh, no, they proved that it went.
And when you go and look at those studies, the methodology behind them, it was things like they looked at prior studies like the expansion of health insurance under Romney care and then looked at how much coverage went up under Obamacare and just assumed that that trend followed through.
Right.
Whereas they put the actual mortality data was different.
So you're totally right.
I mean, there's all kinds of moving parts with these things.
But I'm just saying prima facie mortality rates went up exactly when Obamacare fully kicked in.
And even if you break it down by the states that, in a sense, more took advantage of Obamacare than the states that didn't, if anything, the outcome was the opposite.
So people who are like, you know, accusing their critics of denying science and not being empirical.
I'm saying the burden of proof is on them and just, you know, among libertarians again.
Is that really so shocking to think the government gets more involved in health care and the average health outcome goes down?
So as far as the mechanism, I think you're right, Scott, that may be partly what it is.
It's like if the government just declared, hey, everybody who wants to get a new car, go ahead.
If you just show up at a dealership, whether you have the money to afford or not, the dealership now has to give you a new car and, you know, it's illegal for them to turn you down.
It wouldn't be shocking that several years into that system, the quality of cars produced would go down.
Some people would get cars who didn't have them before and they would be better off.
But in terms of would that really help the car market nationally, I think just passing that mandate and saying, no, car dealerships have to give you a car, whether you can pay for it or not, that would screw everything up.
And I think that's what we're seeing here.
All right.
Now, the Republican bill, they're not libertarians.
And I want to ask you about, you know, your libertarian world and how you think things should work in a minute.
But what about these conservative SOBs over there in the GOP?
What are they going to do?
Well, so this plan that they're proposing, and I confess I am not, I was up to speed on the Affordable Care Act when it first went in.
And, you know, I co-authored a book with a medical doctor on it.
So I was familiar with that thing and I was really up to speed on the details.
This stuff, I don't claim to be an expert on it.
The big picture, my guess is this thing, it's sort of like there's this unsustainable system, this train wreck that Obamacare was that was just going to fall apart and they were either going to have to totally take it down or go to single payer.
And the Republican plan, I think, is like 50 percent of Obamacare.
And so maybe it will linger along for a few more years relative to what would have happened.
They pushed back, you know, the Day of Reckoning, but it's still an unsustainable system.
So the benefit of it is it's getting rid of the mandates, right?
So it's not saying you have to buy health insurance as long as you're, you know, a person in certain income ranges or whatever, the way Obamacare did.
But on the other hand, that's kind of what the only thing that would have made the Obamacare system work, right?
If you're going to say that health insurance companies can't deny coverage to people if they have pre-existing conditions, then the only way to make it possible to stay in business as a health insurance company is to force healthy people to buy the product, like so that the risk pool includes healthy and sick people.
And so the Republican plan, and this is kind of like what Trump was promising, why, you know, I don't think he even fully comprehended what he was saying.
He was kind of saying, oh, no, we'll keep all the good stuff like universal coverage, but we'll get rid of the mandate.
And that those two, that doesn't go together.
You know, if you're going to say they have to give coverage to everybody, then you got to say everyone's got to buy it or else, again, the actually false part.
I see.
This is the thing I never really understood.
Right.
Or maybe I did.
But Obamacare splits the difference there, right?
They buy on one hand, some people's premiums go way up.
And like you're saying, they have the mandate to force the young and healthy to buy insurance that they otherwise don't feel like they need or whatever like that.
But also the national government gives giant subsidies to the insurance companies to make up for the shortfall that happens anyway.
So in other words, why couldn't they cut the mandate on the individuals and still just keep taxing us all the debt and do it that way, cover the insurance company shortfall that way?
Well, maybe you're getting, you're asking what some people have been saying that look at it.
And so let me just paraphrase and tell me if this is what you're getting at.
If the issue was there was this group of people who were uninsurable under conventional, you know, measures and people want to do something about like this, this is an unconscionable, you know, the modern day and age, this kind of society we have that we're just going to sit here and let these people who are born with something or develop some condition, they can't get health insurance and with prices, what they are without health insurance, you know, that's you, you're, you're done.
And so, and so to deal with that, yeah, one thing you could have just said, all right, why don't we just subsidize them?
You know, we'll just see, okay, how much would their health care costs, because they're uninsurable and we'll just directly subsidize them and tax the population.
And if people think it's fair, well, you know, I didn't mean single payer.
I meant, I guess I meant taking the way I understand it under Obamacare, it's half the individual mandate and half other tax revenue that's given directly to the insurance companies as subsidies to them to make up for the money they're losing anyway, even with the individual mandate.
Right.
So I was just saying, what if they just abandoned the first part and kept the second where they just subsidize the insurance companies so that they don't take that hard of a loss on the preexisting condition.
Right.
Okay.
Yeah.
Well, just to finish, that's my idea, but I was just trying to understand about the, what the Republican version of the Democrats law is here.
Yeah.
So, but I, by the way, I wasn't saying like, what about a single payer?
I just meant like directly paying for that small group of people, just like with Medicaid.
Okay.
Yeah.
Yeah.
You know what I mean?
Just like, like expanding Medicaid just for those people, even if they're not elderly, that, that would be the idea.
But yeah, I think it just, the numbers might not work out right.
And for whatever reason, that was the big sticking, sticking point of what's, what's happening right now is, so yes, there was a provision.
It was like called a risk sharing program where to get the health insurance companies.
And so this is part of what happened and why I think the initial effects of Obamacare were not as fully severe as the actual underlying logic would dictate in the long run.
Because initially, partly why health insurance premiums didn't skyrocket when Obamacare was first, you know, fully implemented.
And so the, the fans of Obamacare were saying, see, look at, you can, you conservative critics warned that this was going to cause premiums to jump and no, it's actually not so bad.
But partly why that happened was like you say, Scott, there was provisions that said to insurance companies, go ahead and set your premiums.
But if you're way off, you know, if, if the, you know, the claims you have to pay now end up going way up more than you predicted because now we're changing the rules of the game so much, it's hard to know.
You can't rely on historical data because now we're changing everything.
If you, and if you end up losing a lot of money because you didn't charge enough in your premiums, we, the federal government will make you, we'll share that cost with you and we'll reimburse you, you know, according to some formula.
And then they were charging, they were saying on the flip side though, if you overcharge, right, like suppose you make a lot of money, you know, you, you charge premiums higher than you needed to, well then you're going to give that, you're going to share that with us.
And so the, the question was, is that, was that element supposed to be self-financing?
In other words, suppose it turned out as, as what did happen in practice, that the insurance companies on that said to the government, whoa, you owe us a bunch of money.
And then was the government supposed to kick, you know, come up with that money somehow because that wasn't funded in terms of the other provisions.
And then the Republicans were digging their heels and say, no, we're not paying that.
And so the insurance companies then were like, holy crap, you know, that was the deal.
You told us to go ahead and set our premiums thinking if we were wrong, you were going to compensate us.
And so now you're not going to pay.
And so that's when a lot of insurance companies start saying, well, we're pulling out of these exchanges and this is crazy.
And so that turned into a political fight and, you know, are the, you know, as the Republicans, are they just trying to ruin Obamacare by not making these payments?
That was kind of the spirit of the legislation.
So that's the kind of stuff that happened.
So politically, no, there's no way, Scott, they would have flipped and gone the other way because that's partly how and probably it's true.
They're partly doing for political reasons just to make sure Obamacare failed.
But also just in general, that that would have just been a long way around.
I think the same thing that if they just try to do it through taxes and so on, that would have really because the problem is if you're saying nobody, people can choose on their own whether by health insurance or not, then why wouldn't you?
And you're saying, but if you're sick, the insurance companies have to give you a policy at that point.
Well, then rationally, why wouldn't everybody just say, OK, I'm never going to pay a premium until I get sick and then I'm going to apply for health insurance.
And so if people do that, then no amount of taxes that you levy on rich people is going to cover that because that you've totally screwed up the whole market.
And insurance breaks down in that kind of case.
It's like say, you know, if the insurance market for automobiles said when you get into an accident, then you go apply for automobile insurance, collision.
I mean, that, you know, we're going to pay for it with taxes or whatever that that would be a crazy system.
They would just break down.
So I think the same thing here is for insurance to work.
It's got to be that people are, you know, paying in the system without just gaming it.
And so, yeah, it would just turn into single payer at that point.
All right.
Now, so the saying goes, the middle of the road leads to socialism.
And we could follow this conversation to Medicare for all or whatever, as they try to push it the single payer type thing.
But in fact, I'd like to ask you about that.
But first, is it OK if we go back a little bit?
Because, you know, the presumption, the way that people talk about this, of course, is that, well, look at the previous system and previous system before Obamacare is madness.
You know, my wife has lupus.
Well, she had health insurance when she came down with lupus.
In fact, she had health insurance the whole time.
They misdiagnosed her.
But even when they finally diagnosed her correctly, you know, and but she had it the whole time.
Then she changed jobs and changed health insurance companies.
And they just said, you know what?
Because the law was, the new company, if you change, as long as your payments are current, then it doesn't count as a pre-existing condition kind of thing, right?
But the new company just said, nah, screw you.
It is a pre-existing condition.
So that's it.
No more health insurance for you.
So here comes bankruptcy.
I read a thing the other day.
This girl that writes for Wired or Boing Boing or whatever, I think it's one of them.
She says, well, she came down with the breast cancer and she had insurance.
And as soon as she let them know, yeah, I got breast cancer and I need you guys to start helping me.
They open up a fraud case on her and said, nah, we think you probably already had cancer.
And now you're trying to rip us off.
Which you and I know that they know that they're lying, that she did not do that.
But they just want to get out of it because they don't care.
Why would they care?
And it's not like the judge is ever going to take her side, right?
So people go completely bankrupt.
People just die.
She wrote.
I saw her little Twitter thing.
A lot of ladies that were also with her getting their chemo, a lot of them just died because they just ran out of money.
There's nobody there to help them.
And they weren't poor people.
They're regular people.
But breast cancer treatment's expensive.
Once the insurance company screws you, you're a dead man at 40 something years old or whatever it is.
That was the previous system.
And you and I both know that to hear a Democrat tell it, yeah, that's free market capitalism for you.
And maybe it is, Bob.
You know what?
Market capitalists aren't necessarily decent people, right?
I trust the market, not them.
But so then my question is, I bet that probably you have an answer like, no, this is Nixon's fault or something, that it wasn't the free market that set it up like that.
It was the government that set it up like that.
That's my bias, too.
I'm sure that's right without knowing the answer.
But you go ahead and tell me.
OK, sure.
So you're right in that there are plenty of horror stories, and it's not that the system as of 2007 was great.
And I think sometimes people who talk about the evils of Obamacare and government take over health insurance, they make it sound like, oh, yeah, there was this laissez faire beautiful system in 2007.
And they're digging themselves into it, into their own ditch there if they say that, because like you said, the system really was screwed up in 2007.
It's not surprising that people thought we need to change this.
This is an unworkable system.
And this is the number one cause of bankruptcy in America.
And people running their business into the ground or something.
It's their wife gets sick and their whole family falls apart over it, you know?
Right.
And you're also right that it was like the thing that if you went and worked for a large company a lot of times, then yes, they could get part of their group plan and certain things would happen.
But certainly if you were in between jobs, then like you say, there's even cases of if you switch companies, you know, maybe they would then try to balk at the other end.
And so there's lots of examples like that.
But you're also correct that that system is not like, oh, that's just what the market outcome was.
I mean, if you just think about it, you know, it's not due to the nature of insurance per se.
Right.
It's not that we I can't drive right now.
And why not?
Oh, because I don't have auto insurance.
Why?
Oh, because I'm in between jobs.
And you know how your employer gives you auto insurance.
People don't even talk like that.
That would be weird to even talk.
But yet we do say stuff like, oh, yeah, I can't get that elective procedure right now because I'm in between jobs and I don't have health insurance because, you know, I get it from my employer.
And so if you try to understand why is that?
There is a history, you know, very quickly to give two examples.
So in during World War Two, as you know, Scott, the government was printing money like crazy that would have normally led made prices jump up.
They didn't want to let that happen.
So they imposed wage and price controls.
But they and so a firm who wants to bid away, you know, talented workers from other companies couldn't offer more money.
That was illegal.
But what they could do was offer benefits like saying, oh, we'll pay for your health insurance.
And so that was partly why that became just standard as part of, you know, company compensation packages.
And then also the income tax code keeps this in place where it's standard for people, you know, with nice nine to five jobs to get their health insurance from their employer, because from the employer's perspective, if they pay for your health insurance, like for you or your family, that's tax deductible to them.
Right.
That's just like part of their compensation.
That's a cost of business.
But you as the employee, if they gave you just money, then you've got to report that on your taxes.
But the way the tax code is right now, if they pay for your health insurance, you're not taxed in kind on that.
And so so it's a way to minimize taxes, especially if it's like, you know, a high productivity employee who would have gone and paid for an expensive health insurance plan anyway.
You know, that's like a way of reducing their taxable income by 10 grand or 15 grand or whatever the number is.
So that's partly why the system is how it is.
And everyone's dependent on their employer for health insurance.
But I think the big thing in all this is why is health care so expensive?
And there I think it's because of the FDA and all these, you know, licensing and stuff at the state level where the government is just artificially keeping it very expensive to get health care, which is why everyone thinks, oh, I need to have health insurance in order to pay for it.
I think that's part of the problem is people are mixing the terms health care and health insurance as if they're interchangeable and they're different things.
Yeah.
All right.
Now, in fact, I wonder if you ever read that thing a couple of years ago, maybe by.
Remember that he used to have his own magazine, Brill's Content.
I don't think it's I don't know if it's his own magazine anymore.
But this guy, I forget his first name is Steven Brill or something.
He does always really long, long form work.
And this one was all about basically at any hospital you go to.
There's the bill and the official menu.
But there's also it's like in and out burger where there's like the secret menu or whatever.
And if you look at that, then it's a whole different other level of prices that the law mandates.
You know, all of this stuff is completely lower.
Anyway, he was just delving all into why prices are are so distorted, although health care can be really expensive, right?
Like if we just had, you know, a real free market, some of these treatments would be extraordinarily expensive that maybe even upper middle class type people wouldn't ever be able to afford some of these things without insurance, right?
That could be the case, but it would certainly help things.
And so you're right.
There's there's and I don't know if this is what this guy was getting at, but people can certainly if you go up and you're trying to get a procedure done and they tell you how much.
Well, for one thing is they won't tell you ahead of time how much it costs.
Like there was some thing I heard on the radio when I was in Nashville.
Some woman who worked for a radio station was pregnant and she was kind of doing like a story and expose on health care costs.
And she called around.
I'm making these numbers up, but it was this is the spirit of she called some like eight local hospitals and said, yeah, if I have a regular, you know, vaginal birth and all this stuff and no complications, what are we talking about here?
How much in only one place would even give her a number?
The other places.
No, absolutely.
We're not going to tell you a number because then, you know, if it comes up, be more expensive.
You're going to get mad at us.
Only one would would even give her a figure.
So it shows this is not a normal market.
Like people aren't treating it like that.
And so, you know, the health care providers know that.
And so when you go and you get a bill, if you say to them, OK, but I'm actually going to write you a check, you know, then it could be a smaller amount because they know yet to say that we're going to send this guy a bill.
They might not pay.
We're not going to go to debt collection or we're going to argue with the insurers.
And whereas if you're literally paying us in cash right now, then, yeah, we'll give it to you for less.
So even that right there kind of shows this is a weird market where they have to inflate the cost on their end because they know a bunch of people are never going to pay it or they're going to pay it through debt collection years later.
So it's this vicious cycle where it breaks down like that.
But I think part of the problem, though, Scott, is we've gotten to the point where insurance, you know, quote, pays for everything or best a deductible.
So if people made this analogy before, but it's worth repeating, if what happened in auto insurance is like what happens here, then every time you went and got an oil change, your auto insurance would cover that.
Right.
Whereas, no, the reason you have insurance is for catastrophic expenses.
So, yeah, the reason you would have health insurance is not to go get a checkup or even some minor thing.
But like you said, if you get cancer or, you know, some real catastrophic thing, that's the point of having health insurance.
And everything would all around would be a lot more affordable if that's really the way the system works.
But that isn't how it works right now.
It's where health, you know, the health insurance companies are the ones dealing with the doctors and the patient is treated like this annoying nuisance who's over here bothering everybody when really the patient is supposed to be the customer.
Yeah.
You know, this reminds me of I'm almost certain this is from Harry Brown's Why Government doesn't work, because as soon as any industry gets in bed with the government, it makes the focus the profits of the supplier rather than the good of the consumer.
It turns everything around into basically a political football where the organized masses, I mean, I guess the best the organized masses could do would be like the AARP or something like that.
But it's nothing compared to the lobbying power of the hospital companies, the pharmaceutical companies, the insurance companies.
Right.
Yeah.
And you might remember when the Affordable Care Act, you know, Obama first gets elected and he's coming in and he was making a push for this.
The I don't know if it was the pharmaceutical companies or like the health care co-ops or whoever.
I don't remember which actual group was doing it, but they were funding like anti Affordable Care Act commercials.
And then that just all went away.
And I believe it was because there was like backdoor meetings where, you know, the people crafting legislation told them, you know, look at look at all these provisions we're giving you.
If you drop these, you know, these ad cam, we'll change the numbers because look at they were they were passing a law saying every American had to buy their product, you know.
So that's the way it was like this.
Marcy Wheeler, who's a progressive, you know, empty wheel on the Internet there.
She's, you know, obviously not a libertarian like us where she was just looking at it and saying this is a bad deal.
This is I forget the lady's name, but it was the most powerful lobbyist for the I think for the insurance companies could have been for the pharmaceutical firms.
I think it was for the insurance companies was like the lead crafter of the legislation.
And she was in charge of the crafting of the legislation.
Yeah.
And that's I hope I'm paraphrasing Marcy right there.
I think I am.
I mean, I'm not familiar with her particular work, but I mean, yes, I've seen many progressives who, you know, really are like like people who are fans of a single payer or something and look at Europe and say, oh, why don't we do something like it?
A lot of them were outraged by what happened with this stuff.
And, you know, this wasn't even that I don't even think she was saying necessarily single payer would be better, but just, hey, look, this is Wall Street's bill or this is, you know, the corporate bill.
This is not some Democratic utopian, whatever you imagine Obama is going to do for you type of thing.
You know, that's what she was saying.
The other progressives.
And this is something that, you know, when I was younger, like so I know your your audience is probably doesn't fall for this, you know, being antiwar and so on.
But yeah, it's I think there's still a lot of young and certainly conservative types, you know, who who don't like the government messing with big business a bit.
And they're naive and they don't understand that big business actually benefits a lot of times from these regulations, you know, things like Sarbanes-Oxley and whatever.
Like if you were a big financial firm, you might benefit from that because having all these extra accounting mandates and whatever, you can better afford to hire a bunch of new accountants and tax attorneys, whereas, you know, a competitor who's only half your size that that fixed overhead cost of that much more personnel is going to hurt them more than you.
And so, you know, the Ayn Rand's idea of, like, big business is the most persecuted minority or whatever, that that's not really accurate.
And to understand the way this works is, yes, the big business is in alliance with big government.
And so it's this perverse outcome where, you know, progressive or certain politicians will cater to progressives saying, oh, this stuff's going to clamp down on business and the rich and it's going to help the poor and minorities and underprivileged and whatever.
And yet, and then, you know, the conservative types oppose it because, oh, you're meddling with big business or whatever, the free market, rah, rah.
And yet, in practice, it's the worst of both worlds where it's actually giving handouts and favors to the big business interests and it's hurting poor people and it's also intervening in the economy.
So.
Right.
OK, well, let me ask you this then.
If you're so smart, then how's this supposed to be?
You know, I know a guy, real good guy that I used to know.
I guess I don't really know him anymore, but good guy I used to know who his daughter was born with all kinds of medical problems.
And he's, hey, without Medicaid, I guess it was Medicaid, Medicare, without Medicaid, she'd have been dead.
Simple as that.
The reason she's not dead is because of Medicaid.
So who is going to take care of that?
He's a poor guy.
And maybe that's his fault that he didn't go right into business right out of high school or something.
But anyway, he's some hippie.
His daughter's born sick.
Who's going to help him?
Nobody.
OK, so, again, I mean, I obviously don't know that guy's particular circumstances, but the reason, I mean, people need to realize this is not a normal market when it comes to health care.
Look at, like, why isn't it the case with health care that costs don't keep coming down, right?
Like with computers or something, the computers keep getting cooler and cooler and the price either goes down or it goes up slightly.
But when you do stuff like how much am I paying per megabyte of RAM or whatever, the cost is plummeting.
It's not even close.
And yet with medical care, the prices seem to be going up.
So why is it the competition doesn't work?
But where you do see is in things like Lasik surgery or whatever, or like cosmetic surgery, something that you might go into the mall to get done, those types of things, prices are getting cheaper.
Right.
And it does seem like a normal market.
And so I think that that's evidence that there's something screwy with this, you know, where there's big insurance companies and the government's involved and big hospitals and whatever, that something is wrong and there's not normal market forces and there's not regular competition.
So I think, you know, how do we get to that kind of a framework?
And there's lots of things that could happen.
So, again, things like the FDA, that's why, you know, these these prescription drugs are so expensive.
It's literally illegal for people to compete with it.
These companies have to spend millions.
There's, depending on how you frame it right now, for a drug company to bring a new major drug to market will cost a billion with a B dollars of testing and so forth.
So I think drugs are overprescribed, by the way.
I'm not saying that's the panacea, but I'm just saying when people are trying to say, why are these things so expensive?
Well, that's part of the reason there's rules against importing stuff from abroad, whatever.
And this thing like limiting doctors who can come in certain, you know, licensing boards and whatever.
This is just normal.
I mean, this is like the guild system, right, that they're artificially limiting competition in order to raise rates.
And so there's lots of examples where it's artificially crippling competition and you're not having normal market forces.
So I think that's part of how you would you would get out of this logjam is to allow competition and try to get some semblance of a market going to have competition.
OK, so that's a great first part of the answer.
And I think you're right.
And I remember driving a cab and having a doctor in the back of my cab.
And he was a free market guy, not because of any Austrian economic schooling he'd gotten, but he was the way he framed it to me was, look, me and my doctor friends, we're freaking doctors.
OK, we can run a business.
And if we were just free to do it our way, prices would be way cheaper.
Everything would be fine, whatever.
He believed that.
OK.
And he made sense the way he explained it to me.
But still, even then, price is cheap.
Poor people don't have any money.
Something bad happens to them.
They can't afford the insurance or they didn't already have the insurance.
And everybody, you know, the I think on the right and the left, especially, you know, Democrat types, you just want to let them die.
That's their answer.
And and that's that's their answer to your problem.
And then their answer to your problem is government's got to do it.
Of course, the national government has to be the safety net.
Otherwise, poor people just die.
And so even if we had an almost completely free medical system, still, what do you do about people who are poor?
People who, you know, their little baby's got cancer, whatever, whatever, nightmare or horror story kind of thing about it.
What are the libertarians do about that, Bob?
OK, so I think, you know, we'd like we have to go on the moral issue and then say if what the person is saying is.
It's moral to take money at gunpoint from some people in order to spend it on things that I think are more important than what they were going to spend it on.
I would object and say, no, you can't do that.
That's not allowed.
Now, you know, continue with my moral framework.
If there are people who are literally dying because they can't afford something and there's other people who are rich and they have six mansions and what have you, then I would say, yes, they have a duty to help the poor, you know, not legally speaking, but morally, ethically.
And they should go ahead and do that.
And we can look, you know, back in like the 1930s and stuff, there were plenty of doctors who would go and make house calls and things and do stuff for the indigent.
And this is still even to this day, that's that's part of, you know, people doing things pro bono.
And so if if the government, you know, the government doesn't magically have money to give to people that it didn't first take from somebody else.
So it's not that we have more resources to help poor people if we do it through the federal government.
It's actually the opposite, that there's money, there's more money lost through bureaucracy and just having high tax rates, you know, discourages work efforts.
So there's there's less to take in the first place.
So if the government got out of the business of taking care of millions of people who otherwise wouldn't be able to afford health care, then the public would have that much more money that they could channel through private philanthropic efforts.
So again, I think those mechanisms would be there.
But ultimately, if somebody says, no, but suppose it doesn't, I want to reserve the right to take money at gunpoint from this guy and give it to this person over here for health care.
Yeah.
If you're put back into a corner, Scott, I'm going to say ultimately, no, I don't agree with that.
But that's stealing.
There's there's one more refuge of this argument, though.
I'm thinking of leftists I've argued with on Twitter a little bit.
And I try not to get too far into it, because I really only care about the wars and stuff because I'm healthy.
It's not my issue.
But their answer to what you just said is, yeah, but billionaires.
So you know, what if we just had the the only income tax bracket was people who it wasn't even income.
Anybody who's sitting on more than one billion dollars worth of stock in anything, we're taxing your ass to make sure poor people don't go without, you know, what should be pretty cheap and available health care.
Then that way it's not immoral, because once somebody is a billionaire, and I think there are clearly exceptions to this, but I know you're free market enough to know that most billionaires are on welfare anyway, as Bill Gates said, hey, we should have high income taxes on all those billionaires because each and every one of us got rich off of the infrastructure of this great country that this national government administrates for us.
And what he means is there's windows on every machine in D.C. and that he's rich because of them in to a large degree.
So how about we just hold them at gunpoint and take just enough?
I don't mean eat the rich and dissolve all capital and consume it like a Maoist until we all starve.
But how about just enough?
We just rob them just enough.
Fair enough.
Let me just say as a broad point here that what I'm always advocating, of course, is what I think the best vision of a free society would be.
And so if somebody wants to say, OK, yeah, but what you're talking about is not going to happen.
And so let's be more realistic and say something politically plausible.
That's fine.
If I were like a senator.
It is apples and oranges, though.
You're right.
And I'm with you.
I'm for not having a national government whatsoever, even a state government.
So who's going to tax who?
So I get that what I'm saying might seem pie in the sky or whatever, but that's not really it.
But if I were a senator or something and then maybe you could say, OK, but I want you to restrict your discussion to something that's going to happen next Thursday, not some far off thing.
So I get that.
But again, here I'm just this libertarian economist, author, and we're having this hypothetical conversation.
So that's why I have the liberty to talk about what the optimal thing to do is.
So in your case, yeah, I certainly wouldn't cry crocodile tears over if the government went and took money from some guy who was a billion, especially like some guy who made money off defense contracts or something and took some money from him to give it to somebody else that they wouldn't.
Their kid wouldn't, you know, die.
Obviously, I'm not going to be up at night wrestling with the horrible injustice of that outcome, because like you said, you're basically just taking money back from someone who stole it from taxpayers in the first place in order to fund the death machine.
So I get that.
I'm not I don't want to come off like I'm saying it, but I'm saying, no, the ideal outcome would be to not have these billionaires who become billionaires through state contracts and such and that the money you'd say that with the other thing, too, is there's not that many billionaires.
I mean, you really couldn't replace the current system just by taking money from them to pay for it.
Like you really would have to switch over to a system where it was largely self-sufficient if all you were going to do was to tap into billionaires and pick their pockets in order to fund these programs.
Yeah.
Well, see, that's the whole worst part about all of this to me, is that the more any of us in the society are the demand for the government supply, then they could never do without the income taxation the way that they do it, which includes extorting to the limit the poorest people even.
Right.
It's not like they only tax billionaires.
They tax everybody.
And I know I'm off on a tangent now, but any libertarian knows what I mean about this.
Hell, any American ought to know what I mean about this.
The system of income taxation, they're basically making it a crime for you to earn anything.
And you have to then confess to how guilty you are of every cent that you earned so that then they can take as much of it as they can.
And you can't lie about how good you did.
You must confess to how good you did, you criminal, and pay up your fine for achieving anything.
It makes no sense whatsoever.
It just makes no sense whatsoever.
I'm not arguing for a fair tax or any kind of thing like that, but I'm just saying, the fact of income taxation in America is like the Twilight Zone.
It's completely crazy that anything that calls itself a free society has income taxation.
And yet, like you're saying, you can't just tax the billionaires.
You have to tax everybody in order to pay everybody.
And that's the system we've let them stick us in, basically.
And yeah, one point is you're right.
That's funny that in other areas, you can't be compelled to testify against yourself.
Right.
But yeah, this is the one area where you do have to.
And if we catch you making a mistake, then you're getting in extra trouble.
You're right, Scott.
And this thing, again, just for your, especially, I understand that there are probably listeners you have who really are skeptical of big businessmen and they have horror stories of actual real-life insurance companies, not the stuff in my fairytale land of free markets.
I get that.
I really do.
But also, by the same token, with that hard-nosed cynicism and realism, you've got to say the same group of people in Washington who have no trouble bombing foreign kids, do you really want them in charge of your health care?
Right.
It's the same group of people.
And so they don't all of a sudden switch to become completely moral and trustworthy and concerned about the health of the poor people when it switches to domestic affairs.
And so for people who are very anti-war and don't trust the U.S. government when it comes to foreign policy, again, why would you want them in charge of whether your daughter gets a kidney transplant?
If we can remove the separation of health care and state is a good idea.
Yeah.
All right.
Now, so on that, though, is there a difference between, isn't there a difference between socialized health care and a single payer system where all the doctors still work for private companies and everything like that?
It's just now basically everybody has a Lone Star card or whatever it is for, you know, for food stamps.
Now it works for your doctor, too.
No?
Yeah.
You're right.
There's various levels of intervention.
How much freedom are the people of Texas giving up or the people of the U.S. giving up if we have the government as the single payer out of the pot rather than insurance company middlemen?
So you're right.
There's various level.
And yes, single payer is not literally the same thing as completely socialized medicine in the sense of if all the doctors work directly for the government, that would be even worse, as you say, because as long as you just have to be the ultimate nightmare.
My God.
Can you imagine?
I'm sorry.
I just saw blood.
Sorry.
Go ahead.
So.
So you're right.
Because, you know, the virtue, even if the government were paying for it, as long as there were still the doctors, like you say, who worked technically in the private sector, although all their contracts would come from the government or their payments, but at least there would be some competition among it.
And even though the government wouldn't care about containing costs as much as any individual private insurance company, nonetheless, you know, if one company is coming in and say, Oh, we'll cover people this amount.
The other one's undercutting them by 30 percent.
You would think that would contain costs more than just flat out.
No, everyone's literally working for the government.
And it's truly, you know, a government operation like the pen like.
So anyway, you're right that there are levels there and we should be more precise in our language.
And when people talk, I think you're onto something there, though, when you're saying that even in the case of just so-called single payer, ultimately there will be a government bureaucrat, if not an insurance company bureaucrat, saying, no, no, no, this is too much too soon or whatever, and overruling your doctor.
Yeah.
So it's ironically the what the benefit is also the scary thing about that.
But yeah, they would they would contain costs more.
But you're right.
The problem with single payer is ultimately, you know, the government's in charge and, you know, Sarah Palin, of course, with her death panels thing.
And you could say that was a rhetorical stunt and it probably was.
But it is the case that right now we have the technology.
You can prolong life.
You know, you can spend lots of money keeping somebody who's 83 alive for another year.
And then some choices do have to be made to say, are we going to spend an extra sixty thousand dollars, you know, keeping this guy who's in constant pain alive for six more months?
Or are we going to use that money to give prenatal care to, you know, 50 kids or something?
And so the there's no way to answer that question, I don't think definitively, except to say, let's leave it in the hands of the individuals involved with their resources.
And so when you start letting government officials make that decision in it, number one, they're going to make mistakes even if they mean well.
But number two, that gives an extra dose of arbitrary power to these people.
So, you know, you might be afraid to criticize the government if they have the ability to deny your aunt her kidney transplant.
Well, I mean, and now these decisions are made by insurance company bureaucrats.
But then again, I mean, instead, but then again, only under the law and to the degree that the law will allow.
Right.
So somewhere if if they say, well, we want to unplug your grandma or we want to deny this kidney, there's a law in your state that says when they can say that and when they can't already.
Right.
Or a court decision.
Right.
I think that's correct.
I'm not really expert on the laws.
But even there, though, Scott, ultimately, the family, if they want, if they had the money, they could pay it themselves.
You could say, well, it's really a high cost.
But under single payer, I mean, by definition, single payer, if that means the government pays all medical bills, then you don't have that option.
Right.
And in some countries, there's like a bifurcated thing where they call it single payer.
But yet it's allowed to have you know, you can opt out and pay a doctor, you know, on the side.
But in some places, even that's not allowed because they don't want to have like two tiers of health care for rich and for regular people.
And so it's literally illegal.
Like you can't pull a doctor aside and say, hey, you know, can you treat me next?
You know, can you move me up in your schedule and I'll give you this payment on the side like that's not allowed.
And so I'm saying in that kind of a framework, then you really are ultimately dependent on these power brokers, whereas in the current system, you know, if the insurance company says, sorry, we're not paying for grandma anymore because she's in comatose.
Technically, if the family could come up with the money, they could do it, too.
It's not like the insurance company can can kill your grandma.
They can just say, we're not paying for it anymore.
Yeah.
All right.
Well, you know what?
I think I'm probably out of questions and I don't know if I ever even had any good ones here.
Is it is there anything I'm really missing on this health care debate that you think people need to understand better?
So one last thing I want to say, again, just to make sure people understand the numbers and what's flying around here, besides the claim that, oh, yeah, this GOP plan is going to just kill thousands of people.
And we've talked about why I think that's misleading.
The other thing is to say, oh, this is just a tax cut for the rich.
The the studies that this was more for the for the House bill that came out.
But the studies coming from like the Urban Institute.
Right.
So this is not a right wing outfit.
This is pro ACA when they were trying to show how much this was going to help the rich people.
Yes.
The bulk of the benefits in terms of these tax reductions that were repealing what happened under Obamacare were accruing primarily to the wealthy because the Obamacare tax hikes were, you know, hitting the wealthy the hardest.
So that's going to happen.
But even their own study, I just look at the numbers, we're showing you this was going to be a tax cut for fifty five percent of American households.
OK, what the GOP House bill was.
So just keep that in mind.
It's actually not correct the framing to make it look like, oh, yeah, they're just giving tax cuts to this handful of rich people and then millions of people are literally going to die.
Both ends of that claim are misleading at best.
But they are going to be ending the increased subsidies for the states that chose to expand Medicaid.
Is that it?
Or is it Medicare?
I'm sorry.
Yeah, there's.
Well, they're changing the formulas around.
So, yes, I think they're they're like if in terms of projections over time of how much would be paid.
But they're not ending it.
They're not right.
I believe it's still.
Yeah, I think it's still going.
I think it's one of those deals where the rate of growth is going to be cut.
So, yeah, if you look ahead to fiscal year 2030, how much is the government going to get?
It's a cut from that level.
The other thing is, which depending on your perspective, is either good or bad, is there instead of giving them the subsidies, they're giving like block grants and telling the states here's the money you do with it, what you want.
So if you like experimentation and stuff, you might say, oh, this is good.
Maybe now some states will hit upon ways like introducing copayments or something to limit, put change incentives so people aren't going to the hospital or going to the doctor for frivolous things, whereas other people are concerned that, oh, wait a minute, if now we're leaving it to the states, the states that are more cruel are going to be real stingy with the money, whereas I would feel more comfortable if the federal government was directly paying people.
So that's kind of what people are talking about now here that they're yeah, they're it's going to be less reimbursement through those programs relative to the status quo, but also they're changing the way they're doing it.
It's more like they're just giving them a pile of money and saying, you do with this what you want.
We're not going to dictate exactly the formula of reimbursement that you should use.
Yeah.
All right.
I get you.
All right.
Let me ask you one more thing before you go.
Is that OK?
Yeah.
And I'm sorry, because I didn't mean to keep you this long, but you're interesting.
That's good.
So listen, the bubble popped in what, ninety two or ninety three or oh, yeah, it was no ninety two because that was what really helped cost George Bush senior his spot.
And then in ninety nine, the bubble pop, remember that ninety nine thousand Nasdaq first than the Dow.
And yeah.
And then was a 2008 right there before the election bubble popped, massive crash, stock market problems and then monetary expansion ever since then got to stimulate this economy to prevent the whole thing from cratering, you know, and all that.
So now the question, of course, for you is, when's the next crash, Bob?
In the future.
But I know you don't like answering that question, but I like hearing you explain why you don't like answering it.
Well, because if I'm wrong, then I look wrong and why would I stick my neck out?
But no, obviously, you know, as an Austrian economist, you can't predict the future and things like that.
Let me just clarify, though, if you're looking at the like the Fed's balance sheet, you know, like how many assets do they hold and how much new money did they, quote, create out of thin air in order to buy assets that actually has been constant since like mid to mid to late 2014.
All right.
So Ben Bernanke, yeah, from 2008 onward was was a mad inflator.
But then Yellen came in and kind of oversaw, you know, a return to just a holding pattern.
And so I think I don't have any proof for this, but just in terms of their policies and the rhetoric and whatever, I kind of think that they realized they kept doing rounds of QE every time the stock market would falter.
And then I think they realized, OK, we can't let the world believe that that's what our game plan is, because the dollar will just crash.
And so they brought Yellen in to try to, you know, ease back to, you know, she's hiking rates very tepidly.
But the Fed has not created new money in that colloquial sense of the term since 2014.
And the dollar has actually strengthened against other currencies.
So to answer your question, Scott, I don't know about timing per se, because partly if investors looked at the situation the way I do, we already would have had a crash.
So the question is, you know, are they just wrong or is it that I'm wrong?
But I think I think Europe's going to have a crisis first.
I think their banking system is seriously screwed up, like Italy especially.
They've made a lot of loans that are non-performing, and I think it's just like the ECB is kind of keeping them afloat, especially if the EU itself starts unraveling.
I think you're going to see a financial crash there first, and then only later will it come in and hit the U.S.
All right.
So I'm thinking of, you're reminding me of, I'm pretty sure it's the chapter on the boom and bust cycle, the business cycle from For a New Liberty by Murray Rothbard.
So this would be, especially for people who are new and curious about this issue, Austrian economics and central banking and the boom bust business cycle.
This would be a good intro to it.
So what has government done to our money in the case against the Fed and all that?
But if I could paraphrase from that chapter a little bit here, I think what he says is that they always try to just barely prick the bubble and slowly let the air out.
And yet, no, that doesn't work, dude.
It pops every time, maybe, you know, there's a delayed effect.
But once they stop inflating, because, uh-oh, they know there are limits on how far they can go, it always comes a crash.
There is no holding pattern.
The holding pattern is just between now and when it crashes, because if you're not inflating, you're deflating.
And deflating meaning mostly all the bad loans that were made with all the funny money start coming due and start getting canceled out when the people can't pay them back, right?
So in other words, I guess in question form, is that where we're at now, then?
Yellen has attempted to take a tiny needle and prick a hole in the inflationary bubble and let the air out slowly, but now we're just waiting for the other shoe to drop?
Yeah, I think that's a good summary.
And remember, like with the housing bubble, you know, boom and bust, they did a similar thing.
If you go look at what the Fed's interest rate decisions were in the 2000s, they brought them down to 1%, you know, as of I think it was June 2003, held them there for a year.
Then from June 2004 onward, it was like every time the Fed met, they would hike by like 25 basis points.
So if you look at a chart of it, it looks like a little staircase going up.
So yeah, it's not like they dropped rates that blew up a housing bubble, and then they jacked rates way up and that crashed things.
And man, why aren't you guys a little bit more careful in what you did?
If you were more gentle, maybe, no, they were trying to be gentle.
They were trying to do a, quote, soft landing and just raising rates slightly.
And again, we still had that crash, as we know.
So I think you're right, Scott.
That's what they're trying to do here.
That's why they're raising rates so tepidly.
And also the other difference, too, is the way the Fed has been raising rates since Yellen's in there now, it's not the conventional textbook mechanism that your listeners might have learned, you know, if they had to take a macro class or something where, yeah, so the lower rates, but the Fed buys assets, it creates money, buys assets that pushes rates down.
And then to raise rates, you know, the textbook thing is, oh, you would do the opposite.
The Fed would sell off assets that would suck money out of the system.
And so that ends up raising interest rates.
That's not what they've been doing.
The way the Fed lately is raising rates, they're not selling assets up.
They're not sucking dollars out of the system.
What they're doing is they're increasing the subsidy they're giving to banks to keep their money parked at the Fed rather than making loans to their customers.
So that's how they're making the equilibrium interest rate rise is because the Fed's saying, hey, well, if you keep your money parked here, we'll pay you now 75 basis points.
And so why would any bank lend to anybody else for less than that?
Because the Fed's got guaranteed money.
So there's that element, too, that I think that's partly why you haven't seen the normal thing you'd expect once they start tightening is because the Fed's not really reducing the amount of dollars in the system or selling off assets.
They're just increasing the subsidy they're giving to the commercial bankers.
Yeah.
So now I'm reminded of what Robert Higgs says about the 1920s that, you know, I guess the real worst of the bubble was cranked up starting in 1927.
I hope I'm paraphrasing the man right.
I'm sure you know better than me.
Hell, he may have been paraphrasing you, you bobs.
But I think the way he says is the real worst of the bubble started in 1927, but really all through the 20s, they'd been inflating and inflating and inflating.
But it didn't seem like there was high price inflation because what was happening was, as the Austrians, I think, say, it's only relative, right?
So the prices should have been falling, falling, falling with all the new advances in technology and distribution and everything else that were going on in the roaring 20s.
But the prices were pretty much staying the same when they should have been falling.
And so people didn't realize it was a bubble, but it was only a bubble, not because prices were going high, but it was just because the costs were going low and creating a bigger margin that way.
And then, of course, the bubble got really out of control, 27 through 29, when it finally popped in kind of thing.
But so I wonder if that makes sense.
Well, if I have that right, first of all, I guess.
And then if that makes sense, kind of as a metaphor here, too, where, I mean, I see my wife's grocery, you know, the grocery bill, and it's pretty high.
I don't know.
There's some price inflation.
Maybe they say it's lower than I think it is, but maybe in relative terms, 1920 style, it really is a lot worse than any of us see.
Yeah, so that's a great point to just make sure people got that.
And this is one of the distinctions between, like, the monetarists versus the Austrians, right?
So some people say, like, why do you call yourself an Austrian?
Aren't you just like a free market school?
And aren't you like the Chicago guy?
And in the 20s, yeah, like guys like Irving Fisher, he thought the Fed was doing a great job and thought that, you know, they had paved the way for prosperity as far as the eye could see.
Because like you say, Scott, prices were very stable.
If you looked at, like, the consumer price index or whatever, you know, analog they used at that point, it looked like prices were pretty stable through a large portion of the 1920s.
So if that's what you thought the measure of stable, neutral monetary policy was, the Fed's doing a bang up job.
But also, as you say, the 1920s, like you said, they're called the roaring 20s.
There were, like, really large tax rate reductions and Calvin Coolidge was real tight fisted and kept running a surplus and so on.
So the government was real lean at that point and private business exploded.
People were getting, you know, radios and things like that, and it was a lot of electrification and so on.
There was a huge transformation in the U.S. economy and yet prices were stable.
So what should have happened if the money supply had been fixed is that things would have gotten cheaper.
And that's the way consumers would have noticed, oh, yeah, we're actually a lot wealthier now because my paycheck can buy a lot more stuff now at the store, whereas, you know, you didn't see that.
So by the same token, I think that's partly what happened this time around, that prices there actually was a period in 2008, like the official CPI and all that stuff in the fall and winter of 2008.
Prices were literally falling.
You know, they would come up and say, oh, there was there was literally price deflation in that sense.
And then with all the, you know, inflation of the money supply that got put onto it, they turned that around.
Also things like I know some of your listeners might not like the practice or whatever, but like the hydraulic fracturing of fracking and so on.
There's been a huge boom in the production of natural gas and crude oil in the United States the last decade, let's say.
And so I think that, yes, had it not been for what the Fed did, gasoline would be really cheap right now.
And so, again, I know some of your listeners because of climate change stuff might not like that.
But I'm just saying certain things that would have happened had we not had this influx of trillions of new money, would it would have manifested themselves.
And so, yes, I think it is a bit of, yes, prices are higher, but only relative to they would have been a lot lower after everybody clammed up and saved during the financial crisis because they, you know, are wanting to save and cut back on their spending.
Mm hmm.
All right.
Well, listen, I'll let you go.
I'm sorry I kept you so long here, but I love talking with you.
And I'm sorry to the audience, you know, as an economist, I'm a great antiwar guy.
But the thing of it is, even though this isn't my speciality or anything, I do think that next to the foreign empire, the boom bust cycle, the business cycle as best as really only described by the Austrian school is the most important thing in the whole world.
It's at the root of all of the chaos in our economy and society, really.
Yeah, but if I could just say one in the world.
And so people want to understand that.
Look up Bob Murphy and the business cycle theory, the Austrian business cycle theory, that whole boom bust.
Everybody learns about the boom bust from the time we're kids.
We see it come.
The economy comes and goes.
But why?
Bob Murphy and his colleagues are the only ones who can really explain it to you correctly.
That's the truth.
Well, thanks for saying that, Scott.
And yeah, I like the way you just put it.
It was a heartening thought here is it's not so much, you know, oh, GDP growth could be higher and certain people would have a higher standard of living of six point nine percent.
You just said the chaos.
And that's the thing is that's the way the state keeps control over people is by if you can't trust them, you know, your finances could go to crap or whatever.
You lose your job.
That's the way people get obedient and dependent on the central government is if the economy is really volatile, nobody can plan and make their own decisions.
And they ultimately say, oh, no, but we got to have the state there.
They got to take care of us.
They got to give us our food.
They got to give us our health care because the state has systematically short circuited all these other voluntary mechanisms.
So people are utterly dependent on the state.
Yeah.
And they got the whole story upside down, just as I learned it in elementary and or junior high school or whatever it was with when FDR came and created the central bank at him.
That was the point of it was to smooth out the boom and bust cycle that free markets cause.
And when the truth is exactly the opposite, that's a pretty big light bulb to go off, I think.
It always has been for me.
And it's yeah, it's at the root of so much.
I mean, you think about all the independent family businesses, you know, that make just enough paycheck to paycheck to stay their own boss and run their own life and be independent as best they can.
And then, oh, sorry, we got to pull the rug out from under the entire economy every decade or so.
And whether it's deliberate or whether they just can't imagine that they're not doing the very best job they can be in monetary scientists up there at the Fed is sort of beside the point, really, when and I mean, I've seen the boom, I'm only 40 or I'm very old.
I'm 40.
I've seen the boom and bust come and go.
And I've seen it hurt a lot of people really bad.
I think I've seen it hurt America overall really bad, you know.
And of course, it's it's part of it is for financing the wars, right?
You got to make the wars seem free rather than raising everybody's taxes.
Hey, we're going to spend a few trillion dollars killing Iraqis.
Instead, that's your time out of work is your cost of the Iraq war.
Right.
But people don't put two and two together.
So they get away with it.
Right.
Yeah.
So the Fed came in right, you know, right before World War One.
And, you know, some people thought that wasn't a coincidence that they knew we had this thing up and running in order to finance U.S. entry into the war.
So, yes, if for no other reason, people who are anti-war should also be against the Fed because that's the primary mechanism by which they can, you know, finance these wars that Americans wouldn't otherwise want to pay for.
Yeah.
All right.
Well, listen, man, I'm sorry.
I promise I let you go.
And then I kept talking at you.
But OK.
It's great to talk to you again, Bob.
Take care.
All right.
Thanks, Scott.
All right, you guys.
That is the great Bob Murphy.
He's at the Ludwig von Mises Institute at Mises dot org.
And he keeps the website Consulting by RPM dot com.
That's his great blog and everything.
And he's a research assistant professor at the Free Market Institute at Texas Tech University way up there in the panhandle.
All right.
I'm Scott Horton.
This is my show.
Thanks, everybody, for listening to it.
Check out the full archives, almost 4,500 of them now, going back to 2003 there at Scott Horton dot org.
I run the Libertarian Institute at Libertarian Institute dot org.
Well, with a little help from my friends.
And also, you can follow me on Twitter at Scott Horton Show.
All right.
Thanks, guys.
