Gas Prices too High? Not Yet.

The price for gasoline, while a big headache for all of us, is not high enough yet, or stated differently, the price of gas is not high enough for those in the United States to do anything more than complain about it. If the price of gas were actually "too high" we would demand that we draw the oil reserves out of ANWR. If the price of gasoline were really too high it would be political suicide for the governors of coastal states to stake their incumbancy on stopping off-shore drilling. If gasoline prices were really too high, we would be willing to leverage the ridculous amount of coal resources the United States has for our fuel needs. In the true measure of whether or not gas prices are too high, if gas prices were too high the free market would deliver a new innovative substitute fuel or technologically driven renewable source of energy, and competition for consumer's energy needs would drive market equilibrium to a lower price per unit of energy. However, none of this is happening. We have the luxury of sub-optimal fuel sourcing. We can revel in our smugness, knowing that somewhere a caribou is feeding on grasslands that might otherwise fuel our nation. We can feel good about our ferderal government spending billions on inefficeint, market failures like ethanol. We can enjoy cocktail party banter about the vast energy resources of the United States that go untapped, while we send billions of dollars to buy our energy from those who despise us. A barrell of oil will hit $ 100 some day. It may not be tomorrow, but absent some impactful change in the attitudes and actions of the US consumers, the price of oil will hit $ 100 a barrell. It has to, market demand is increasing faster than market supply. I am certain when that day comes, we will gripe about how gasoline is simply too expensive. However, until we are ready and willing to do somthing about it, it really isn't. While pondering about "somedays", someday this problem will be solved, someday the price of gaoline will be so high that we will do somthing about it or the free market will do somethng about it. That day just isn't today.

Random Thoughts

When did “I don’t like it” evolve into “It’s not fair”. I don’t like that fact that Tiger Woods can hit a gold ball into the next county and makes a ga-jillion dollars a year and I can’t and don’t. I may not like it, but it is certainly fair.

What do people mean by the term “economic justice”? And who determines what defines economic justice. Hypothetically of course, if I am smart, work hard, sacrifice personal time, and am effective in a very competitive industry, is it “just” that I make more money than someone who may not have the skills I do, does not work as hard, and never misses the 5 o’clock happy hour? Is it “just” that the last dollar I earn is taxed at a much higher rate than the guy who does not work as hard or make the sacrifices I make?

Do the fans of government “solutions” (aka handouts) give any thought to how much money it takes to generate every dollar of government benefit? How many dollars in FICA taxes does it take to generate a dollar in social security benefits? I have no idea but I know it is a lot more than the dollar of generated “benefits”. The Social Security Administration has buildings, employees, computer systems, networks, calculators, endless forms, desks, chairs, paper clips…so how much does each dollar of benefit cost us…$ 1.25, $ 2.00, $ 5.00? I have no idea, but I know that any dollar sent to Washington comes back to the people as less than a handful of pocket change. Who are these people who want to send more money to Washington? Is there are worse investment in the world? I can’t think of one.

Remember that no matter what happens in life...the lawyer always gets paid.

The Insurance Thing

When did health insurance equal health care? It seems that the pols, at least on the democratic side of the aisle, interchange health care and health insurance, implying that one cannot get health care if they are not insured. Anyone with half a brain knows that is not the case, but the emergency room as the primary care facility clearly is not the best option for Americans in any scenario.

I guess folks understand the insurance business, but then again maybe not. I am no insurance guru, but I do know that insurance is just that…something that insures me in case of a large unforeseen event. The insurance game is one of pooled risk.

Let’s look at the auto insurance business. I pay my insurance company quarterly around $ 400/month (now that my eldest daughter is driving). Everyone else who is a customer of my insurance company pays an amount based on their coverage needs as well. For the vast majority of auto insurance customers, year after year we lose money on our auto insurance bets. Knock on wood, I have never filed an auto insurance claim, so every year, I have paid into the shared risk pool and every year I have thankfully lost. The only ones who come out ahead are those who have an accident. Hence the “insurance” ensures that those who have an accident do not have to pay catastrophic out of pocket the collision costs, medicals, etc associated with a major wreck.

So why is health insurance perceived to be any differently? Uncle Sam, that’s why. If 10 people pay a thousand dollars a month into health insurance pool, if all of us become sick and need more than $ 120,000 of care the insurance company goes bust. There is no magic in healthcare insurance. There is no money multiplier that creates an infinite sum of funds available for consumers. However, most folks with health insurance are fairly cavalier about spending healthcare dollars as the majority of the funds come from the anonymous third party payer…the insurance company. However, the insurance company and the insurance industry is subject to the same financial and actuarial realities of any risk-based business. If the same 10 people pay a thousand dollars a month for health insurance and only one of us get seriously ill requiring $ 250,000 of medical treatment, then 9 out of 10 of us lost money in the fiscal period, but we were covered just in case by pooling our risk and the insurance company playing to odds that most of us will remain relatively well during the period. So far so good, however, once Uncle Sam sticks his nose into the healthcare business or any business, the efficiencies of markets go away, costs escalate, and we have problems with people being able to afford coverage as costs for care and usage are driven higher by artificial, non-market conditions.

I am a fan of pay as you go for wellness care and insurance for catastrophic or major illness. Just like a high auto insurance deductable, I would be able to reduce the cost of major event health plan by stepping up to the plate for routine care. This would also force me to shop around and look for the best value for my healthcare dollars.

The healthcare “crisis” is really not that hard to solve, as long as people understand the basics of the insurance business and have the incentive to spend their healthcare dollars wisely. There are a lot of difficult problems in this country, healthcare and health insurance really is not one of them, if people would just use their heads….and if uncle Sam would get out of the way.