Home > Life in General > Out of the lockup

Out of the lockup

May 14th, 2009
.!.

I’m back on deck, sort of, after the Budget lockup in Canberra on Tuesday. The event was quite an experience, though maybe not one I’d choose to do every year. It started with a scrum in one of the big halls in Parliament House where the assembled journos +me gathered to await our chance to look at the Budget paper. Then we were sorted into committee rooms, some equipped with elaborate preinstalled computer networks (AAP for example) and some with one power cord for two computers (Crikey!).

I expected the assembled Treasury officials would provide some sort of briefing, but those looking after the lockup rooms were fairly junior people from outside the Budget branch, who had been drafted in to hand out papers, stop errant economists from drifting outside the boundaries of the lockup area and so on.

The big break in the day was Swan’s press conference, attended by lots of ministers and some senior Treasury guys and economic advisers some of whom I’ve met in various capacities over the years, and others I know only as voices on the phone or email contacts.

Then it was back to typing a bunch of analyses which went up on the Crikey website, and which I’ll repost here when I got a chance. After we were released from the lockup, a somewhat anarchic vodcast, and then it was finally time* for a drink or two in a Kingston bar I remember fondly as the old Boot and Flogger.

Since I don’t do a lot in the way of networking, I’ll namecheck some of the people I met on the day or durign the evening: Michelle Grattan, Tim Colebatch, David Gruen, Guy Rundle, Bob Ellis and Don Henry.

I got back yesterday with a significant sleep deficit and a cold, so I didn’t do much except relax. But no rest for the wicked and I’m now back to work looking at the options (lots of them unappealing) for the Queensland state budget in a month’s time.

* Careful viewers will note that Guy Rundle got in ahead of the official start on thsi.

Categories: Life in General Tags:
  1. Lord Sir Alexander “Dolly” Downer
    May 14th, 2009 at 19:16 | #1

    I spent many many many hours at the ‘Boot’ as well. And the Uni Bar of course, dodging ‘Flex’ the bouncer and Robert Macarthur a descendent of the famous Macarthurs, always pacing drink in hand. But that was then.

    The above was indulgent. The budget lockout would be something worth experiencing once. Alan Ramsey once wrote about Paddy McGuinness making a rukus because he wasn’t allowed to bring a slab of beer in.

  2. Alice
    May 14th, 2009 at 19:17 | #2

    Welcome back JQ

  3. stephen bartos
    May 14th, 2009 at 19:29 | #3

    john, I looked for you on the day but without success. The lockup is indeed an event to savour – hopefully will see you next time round. One thing to remember is that there are senior
    Treasury people in attendance if you wait around – Ken Henry was there, for example – but if you start looking too early (ie before the Treasurer arrives) all you get is the more junior people. I wondered where your secret door was hidden, given crikey had forecast you would get out at 7pm while the rest of us were locked up until 7.30!

  4. Ben Eltham
    May 14th, 2009 at 19:30 | #4

    John, it was my first time in the lock-up, which I found an intriguing experience. The lack of internet and normal resources apart from my laptop made it feel somewhat like an open-book exam, and the fact that I was a sole correspondent from a small website who knew few of the Canberra press gallery gave me a chance to observe the scene from the outside.

    One initial observation after getting off the plane on Tuesday morning was how many bureaucrats and journalists lined up for more than an hour for cabs. I joined a lone backpacker and an elderly lady for the $9 Canberra airport bus. The behavioural changes required to adapt to declining petroleum reserves and climate change will be felt especially hard in our car-dominated national capital.

  5. Alice
    May 14th, 2009 at 19:33 | #5

    Hi Ben! We were at Armidale together (when? a couple of years ago in an auditorium doing some presenting)!

  6. Ben Eltham
    May 14th, 2009 at 19:39 | #6

    Hi Alice – are you sure it was Armidale? I don’t seem to remember that. Was it perhaps in Newcastle for This Is Not Art?

  7. Alice
    May 14th, 2009 at 19:56 | #7

    UWerent you at UNE Ben? Or maybe I have a different Ben..

  8. Ben Eltham
    May 14th, 2009 at 20:12 | #8

    I think so! I was a UQ boy …

  9. Alice
    May 14th, 2009 at 20:22 | #9

    Out of the Lockup – well Im going to have myself locked up. Ive just been listening to Malcolm Turnbull on TV with the emphasis being on the second syllable of his surname.

    Rudd hasnt done everything I wanted and some things he has done, I didnt want, but for Turnbull to get up and say the deficit is Labors fault just takes the cake when the Coalition didnt seen the boom when it was in full bloom, staring them in the face, and made no attempt to restrain it at all..instead they patted themselves on the back about their “sound economic management” and ran us all headlong into it.

    Turnbull was also saying the Coalition party are the friends of small business and all for reducing red tape..,.what was the red tape? Government procurement documents!

    Ha!

    If the Coalition hadnt sold off public services and public everything across the nation, we wouldnt have small business wound up in public procurement documents AND we wouldnt have so much public sector private sector corruption now (and we might still have some decent public services).

    Further, if they were so concerned with small business, the biggest cost came in GST compliance; a blatant shift of the cost of tax collection from the ATO to small businesses. Yes, the Coalition says they are for helping small businesses but managed to systematically impose higher costs on them when they were in power.

    Its more of the same from the big business party of greed and self interest. Tell the public what they want to hear and when they get in – give the taxes away to the rich, and the private schools, and condemn the poor and the unemployed as being “lazy” or lacking “initiative”. Why they assume Australians will beleive them again is beyond me. They are suddenly interested in jobs? Yeah yeah sure. They sold off Centrelink and now of course its desperate for staff with 950 having to be rehired to cope with the unemployed. So much for the private job placement agencies the Coalitionm would rather give welfare to.

    What was their main complaint tonight? Private health insurance rebates for the wealthy are going. Hello? Look what they did to super by steering everyone into it? Australia facing the biggest losses by retirees and soon to be retirees. Costello just piled the wealthy into it with hefty tax breaks. Sound economic policy? No. Lunacy and ideology (reward the rich)? Yes.

    I may not like everthing Rudd has done thus far (and I dont) but its a damn sight better than the party that did nothing for 10 years except make an unholy mess.

    I saw Rudd shaking his head at Turnbull. We all should be shaking our heads at the Coalition because the lies just keep on coming.

  10. May 14th, 2009 at 20:33 | #10

    The deficit is the ALPs fault. They are the ones spending all the money. Revenue in 2009-10 will be higher than 2006-07. If they can’t operate within those means (remember in 2006-07 there was more revenue than spending) then they are not even trying. Now I know they are playing at being keynesians and keynesians have to spend like drunken sailors when there is a recession on but it is still their fault for choosing to be play at being keynesians.

  11. SeanG
    May 14th, 2009 at 20:36 | #11

    Alice,

    Private health insurance reduces the pressure on public health systems. Private schools reduce pressure on public schools. Superannuation means saving for the future not asking the government to pay pensions to everyone (Superannuation was a Labor initiative after all).

    You need a trade off and do not forget that higher earners pay more taxes than the rest of us while paying for education and healthcare privately reducing the pressure on public services.

  12. May 14th, 2009 at 20:39 | #12

    Private health insurance is a scam. I don’t want private health insurance (at least not the variety on offer) but the government heards me into it. I don’t actually want public health insurance either.

    I hate to tell social democrats how to do their job but if we are going to have public health we ought to have medicare reformed so it is more like HECS.

    http://blog.libertarian.org.au/2008/04/04/medicare-should-be-like-hecs/

  13. May 14th, 2009 at 20:40 | #13

    p.s. Actually I do like telling social democrats how to do their job. I was just being a little melodramatic.

  14. Alice
    May 14th, 2009 at 20:40 | #14

    Terje.#10
    Thats utter nonsense. the Deficit is because revenue receipts have collapsed because of the crash.
    If the Coalition was still in power (and thank goodness they are not) they would be looking at the very same abyss of a deficit they are blaming Labour for. That is a huge fib Terje and you know it. All these tax cuts for the rich were originally promised by Howard. Rudd is only honouring the election promise he would match Howards generous tax cuts for the rich – so why the Coalition are now complaining about losing a measly few dollars in private health insurance is beyond me. The wealthy are still way in front from Howards big free wheeling donations. If I was Rudd I wouldnt have bothered to honour his own election promises. Its not what we need right now.

  15. Alice
    May 14th, 2009 at 20:42 | #15

    Sean – “private healthcare reduces pressure on public healthcare and private education reduces pressure on public education”.

    It would if they didnt want handouts out of the public purse for it Sean.

  16. Alice
    May 14th, 2009 at 20:43 | #16

    12# Terje – redeemed.

  17. Ben Eltham
    May 14th, 2009 at 20:46 | #17

    TerjeP, the deficit is certainly the government’s decision, but would you rather see public spending contract in the middle of a recession? The government can issue bonds at 4.5%, and even at its peak Australia’s public debt will be easily serviced.

    SeanG, the argument that private health and hospitals “takes the pressure off” the public system is only partly true. Investing the billions the government churns through the private health insurance rebate directly into the pubic system would take the pressure far more effectively.

  18. SeanG
    May 14th, 2009 at 20:47 | #18

    Alice,

    1) The people who use private pay money into the public system first.

    2) The cost of shifting people from public to private increases the per capita spend in the public system which means that eradicating help to private education and healthcare will result in more money having to be pumped into the public system to keep it at an even level (per capita spend) rather than to improve it.

  19. SeanG
    May 14th, 2009 at 20:48 | #19

    Ben,

    I disagree completely on that account. But we’ll have to agree to disagree!

  20. Ben Eltham
    May 14th, 2009 at 20:53 | #20

    SeanG, please tell ;)

  21. Alice
    May 14th, 2009 at 20:58 | #21

    #18 Sean re point 2) – phoooey!

    Edit point 2)The cost of diverting resources from public to private depletes public resources and rewards recipients who can afford private without assitance. It results in more money needing to be pumped into public health and education because the intermediaries like insurance companies jump on the bandwagon and charge ever increasing gap fees (after tapping into the public purse for all its worth eg private clinics that insist on Xrays for everything from headaches to hangovers to sprained ankles to the common cold). Public money going one way – down the private drain to insurance companies and clinics profits who over prescribe when they dont need to. You need a relaity check. It results in public systems being starved and the Coalition knows it.

  22. May 14th, 2009 at 21:11 | #22

    TerjeP, the deficit is certainly the government’s decision, but would you rather see public spending contract in the middle of a recession?

    Yes, yes, yes. Our government is bloated. We ought to cut the size of it whatever the season.

    However even if you’re a Keynesian and you don’t share my view that the government is over sized we don’t really need a spending contraction of any significance to keep the budget balanced. If they just kept spending at the 2006-07 level then we could expect a significant surplus next year. Of course they could ditch any such surplus by having another round of tax cuts which would be a good thing especially given that we are in a recession.

    The problem is not a slump in revenue. It is spending gone mad. Take a good hard look at the numbers. Of course the mad people think there is a good reason to spend like mad, however that’s just part of the maddness.

  23. boconnor
    May 14th, 2009 at 21:15 | #23

    SeanG: “Private health insurance reduces the pressure on public health systems.” Not necessarily. Given a fixed supply of providers (specialists), those specialists who choose to give priority to their private patients will in effect remove a certain quantum of services from the public system. With a reduced supply of medical services in public hospitals waiting lists increase. And it seems plausible to say that a system with increasing waiting lists is under more “pressure”.

    The comment by Ben Eltham is a very valid one. The public subsidy of a private cost that is the 30% rebate for private health insurance is money that could be spent on medical services in public hospitals. It has been shown quite clearly that the equivalent cost of the rebate could purchase many more events of service than the number provided through their provision in private hospitals. That is a real social cost in the sense that a less efficient allocation of resources (the subsidy) is being preferred to a more efficient one (public hospitals).

  24. Ben Eltham
    May 14th, 2009 at 21:16 | #24

    TerjeP, so you don’t mind growth, employment and prices falling? Because cutting government spending in a recession would probably achieve that.

  25. boconnor
    May 14th, 2009 at 21:25 | #25

    Terjep: “If they just kept spending at the 2006-07 level…” Are you saying that the Treasury’s predictions are incorrect that maintaining existing levels of spending would result in significantly higher unemployment in the current environment? If so I’d be interested to know the basis for your rejection of Treasury’s prediction. If not, are you saying that significantly increased unemployment is OK?

  26. Monkey’s Uncle
    May 14th, 2009 at 21:43 | #26

    I’m not sure if Treasury forecasts should be treated as gospel, considering that it was only a year ago that Treasury was forecasting budget surpluses well into the future, and now we are facing a record deficit.

  27. May 14th, 2009 at 21:46 | #27

    Firstly lets agree that in the context of the last three years there is no cutting of spending necessary in order to balance the budget. The question is whether there should be an increase in government spending.

    Are you saying that the Treasury’s predictions are incorrect that maintaining existing levels of spending would result in significantly higher unemployment in the current environment?

    That isn’t what we are being told. What we are being told is that massively increasing spending will mean a doubling of unemployment.

  28. May 14th, 2009 at 21:47 | #28

    Take 2.

    That isn’t what we are being told. What we are being told is that massively increasing spending will not halt a doubling of unemployment.

  29. May 14th, 2009 at 22:01 | #29

    Lets use some real numbers.

    Spending in the 2007-08 period was $280 billion.
    Projected revenue for 2009-10 is now revised down to $290 billion.

    If they managed to stick with the 2007-08 spending level for 2009-10 then they would be running a significant surplus. Spending discipline not spending cuts is all that would be required.

    You can argue in favour of a spending increases but it is wrong to characterise those who oppose the debt as wanting tax hikes or spending cuts. No change in projected tax revenue combined with spending maintained at the 2007-08 level would achieve a surplus.

  30. boconnor
    May 14th, 2009 at 22:11 | #30

    Terjep: “What we are being told is that massively increasing spending will not halt a doubling of unemployment.” Well, I think the claim is not that the spending will prevent unemployment, but that an increase in spending is required in order to minimise the increase in unemployment, given the external shocks and the state of the economy.

    Even if we take Treasury’s predictions with a portion of sea salt, it seems plausible to assume that maintaining existing levels of government spending during a recession will result in levels of unemployment higher than if the government pumped more money into the economy.

    So the social choice problem remains, is it OK to have higher levels of unemployment in order to maintain a certain level of government spending and not incur debt? I think on balance increased debt (which is ultimately a cost borne by those who are employed) is a reasonable trade-off to prevent people falling into unemployment, which is the strongest predictor of someone also falling into poverty. Another way of looking at it I suppose is what is a reasonable price to pay to prevent increases in poverty? My view would be that increased debt and perhaps an increase in taxation is a reasonable price to pay.

  31. May 14th, 2009 at 22:26 | #31

    So the social choice problem remains, is it OK to have higher levels of unemployment in order to maintain a certain level of government spending and not incur debt?

    If you could spend your way to full employment we would have done it long ago.

  32. May 14th, 2009 at 23:03 | #32

    For all those who laud the benefits of private health insurance a few questions. The first is why are the majority of people (including private health insurance memnbers) suffering a medical emergency taken to public hospital emergency departments and not private hospitals? The second is why would any efficient private health insurance scheme need government subsidies to survive?

  33. SeanG
    May 14th, 2009 at 23:04 | #33

    Ben #17 – The reason why I disagree is that the per capita spending will decrease. A few billion extra in aggregate sounds nice but if the per capita spend on healthcare falls then it will mean greater pressure on doctors, nurses and facilities than needs be.

    Alice #21 – This is simply incorrect. An example with healthcare will be the cost to the hospital system from an increase in use by previously private hospital patients. In education each child in the private sector effectively saves money in the public system so that the per student spend is higher than without subsidies to private schools.

    We have to move away from the idea of looking at healthcare and education spending in aggregate and look at the per capita spend. Further, we need to break the ridiculous link that an increase in funding automatically results in an increase in results. Diminishing returns applies to education and healthcare without fundamental reform to the systems.

  34. SeanG
    May 14th, 2009 at 23:08 | #34

    JohnL,

    I think you need to divide between emergency treatment and elective surgery. Emergency treatment is the greatest example of the need for good public hospitals but elective surgery is where there needs to be a proper provision.

    Also, insurance requires critical mass of participants which Australia can suffer a lack of. In other countries, private insurance tends to be linked more readily with jobs so that larger companies use private medical as a hook for new employees.

  35. Monkey’s Uncle
    May 14th, 2009 at 23:22 | #35

    @32 “The second is why would any efficient private health insurance scheme need government subsidies to survive?”

    Two reasons:
    - if private health insurance has to compete with free government health care, it is at a competitive disadvantage. If the government set up free grocery stores next to Woolies or Coles, it would probably affect their ability to surive as well
    - governments regulate private health insurance, and decide how much premiums they can charge, as well as severely limiting their ability to discriminate or charge higher premiums for higher risk patients

    If you took away all these things and had a complete free market, private health insurance could survive without government subsidy.

  36. rog
    May 15th, 2009 at 06:21 | #36

    Generally ambulances will take you to the nearest hospital; if a private hospital is within reach you can nominate.

    In Australia private health insurance is regulated by the law.

  37. PeterM
    May 15th, 2009 at 10:00 | #37

    I suspect that private/public debate that is going on here is not addressing the real problems with the Australian health system.

    From my point of view, the public system is top heavy and wasteful. Administrative costs are probably double what they would be in a competitive situation.

    On the the other hand the private system is in the hands of uncompetive cadre of monopoly specialist colleges which means its costs are bloated as well. But with the added negative that lower ordered workers are exploited and underpaid.

    I’m impressed with the line Professor Des Gorman takes in saying that both systems are unsustainable and if we don’t do something about it soon, we will have health care taking up 20% of GDP in 10 to 15 years.

    You can get the basics of his recommeded approach in the interview at the following URL

    http://www.abc.net.au/rn/lifematters/stories/2009/2561543.htm

  38. gerard
    May 15th, 2009 at 10:18 | #38

    Canberra’s village idiot, Steve Fielding, operating at his usual caliber: “Means testing is MEAN!”

  39. Alice
    May 15th, 2009 at 10:19 | #39

    32# John L asks
    “suffering a medical emergency taken to public hospital emergency departments and not private hospitals?”

    Its well known in the medical community John L – that if you have a medical emergency (car crash, heart attack – whatever) – people will hide their insurance cards and deny private health insurance exists, because they will get the same treatment (straight through emergency to operating theatre) without the huge gap fee bills when they recover and go home. This strategy well known in house.

  40. TerjeP (say tay-a)
    May 15th, 2009 at 10:41 | #40

    I frequently refuse to declare my private health insurance as per the comment by Alice. Private health insurance is a great idea however as it exists today it is a government mandated scam.

  41. smiths
    May 15th, 2009 at 10:48 | #41

    yes yes, the deficit is the ALP’s fault indeed,

    i think terje you could mount a good case that deficits in all industrialised nations in Europe, north america and japan are the faulkt of kevin rudd,

    chinas move from the global powerhouse to exporter slumper was also started by kevin, you will note of course he gave that speech in mandarin at the chinee uni and it was down hill from there,

    i also have it on good authority that the local country womens association has been in the black for 76 years selling lamingtons and cakes and following an appearance by K-Rudd they are now 17 billion in the red

    (it must be hard to navigate with such impaired vision?)

  42. smiths
    May 15th, 2009 at 10:49 | #42

    soory wipe japan from that list, i got carried away

  43. smiths
    May 15th, 2009 at 10:50 | #43

    and soory, is obviously meant to be sorry, some of just have a hard time saying it

  44. boconnor
    May 15th, 2009 at 11:14 | #44

    SeanG Says: “We have to move away from the idea of looking at healthcare and education spending in aggregate and look at the per capita spend.”

    Events of service for similar procedures are more expensive in the private system compared with the public system. On that basis, from a per capita point of view, the private system is less efficient than the public system.

    The great thing about health systems is there’s a good spread of different financing arrangements around the world, so theories of financing can be tested. And it’s interesting that the USA with a predominantly private insurance system has very high levels of cost for medical procedures, compared with countries which have government health insurance schemes. Certainly health costs as a proportion of GDP are much higher in the USA compared to other advanced countries with a greater proportion of government run health-insurance. As PQ has pointed out, the risk for catastrophic health costs for citizens in the USA is very high. I believe for example that one of the major causes of bankruptcy in the USA is medical costs, even for those with private health insurance.

    Monkey’s Uncle Says: “if private health insurance has to compete with free government health care, it is at a competitive disadvantage.”

    Public health provision is not free, its paid through general taxation, and through the Medicare levy.

    “If you took away all these things and had a complete free market, private health insurance could survive without government subsidy.”

    The reason the Howard government intervened in the private insurance market was the continuing decline in membership of private health funds. Consumers weren’t convinced about the product and were voting with their feet. I suspect that without intervention there would have been a slow but inexorable death of private health insurance. You could argue the merits or otherwise of that end result, but is it is certainly the case that a true belief in free markets would allow private health funds to stand or fall on the merits of their product and the prices they are prepared to charge.

    PeterM Says: “From my point of view, the public system is top heavy and wasteful. Administrative costs are probably double what they would be in a competitive situation.”

    Administrative costs for private health funds as a proportion of outlays are higher than the administrative costs of government run insurance schemes. However I don’t know if the administrative costs within public hospitals is higher compared with private hospitals, although I doubt it would be.

    Alice says: “Its well known in the medical community…they will get the same treatment …without the huge gap fee bills when they recover and go home.”

    True. And if you can always go to large public teaching hospital. The doctors and nurses have higher levels of knowledge, they have seen many more cases and are more adept, and of course the cost is cheaper.

  45. carbonsink
    May 15th, 2009 at 13:17 | #45

    Terje, just wondering what your views were on private debt. Most hardcore laissez faire types cannot tolerate a single cent of government debt, but aren’t the slightest bit concerned if private debt balloons to 5x GDP, and its all blown on a housing bubble. Where do you stand?

    Also, are you saying governments shouldn’t exercise any counter-cyclical measures at all? Are the “automatic stabilisers” (expanded welfare and unemployment benefits) ok by you during recession, or should we just let people starve?

  46. PeterM
    May 15th, 2009 at 14:56 | #46

    bocommor @ #44,

    I agree with almost everything you say.
    Health Insurance is one of the risk market that Professor Quiggin was discussing in his recent debate:

    http://johnquiggin.com/index.php/archives/2009/05/06/debate-presentation/

    Information asymmetry resulting in adverse selection makes markets in health insurance very difficult to establish. (Switzerland seems to be the exception that proves the rule!) Private insurance is only possible in the US because employer based schemes are used to aggregate the insured. (But this has the side effect of making based US firms uncompetitive compared with firms in location where heath insurance is the responsibility of the individual or the costs have been socialised in a government run health system.) I suspect resistance from Australian employers is why Howard didn’t follow down the US path with private insurance. So his only alternative was to bribe people to insure privately to prevent the system collapsing.

    However, although definitive figures are hard to come by, I believe the evidence is that private hospitals are generally fairly lean operations. Peter Smedley and Mayne investors found this out when they tried to squeeze costs out of the these institutions. Dr Michael Wynne’s web site at the following URL give a very good, (but I suspect somewhat biased), commentary of their experiences.
    http://www.uow.edu.au/arts/sts/bmartin/dissent/documents/health/mayne_smed_era.html

    Some quotes for the article:
    “But a typical private hospital has just five or six customers that count – State and federal government instrumentalities, and the big five health insurance funds – who are committed to paying less for more.”
    Ramsay Health Care, Shares Magazine 1 July 2000

    “Health funds own the customers and the hospital owners are commodity suppliers who are forced to increase spending to keep their doctor base but are reliant on the funds to pay for their services.”
    Battle For Medi-money Hots Up, Australian Financial Review 8 August 2000

    A simple Michael Porter type competitive forces analysis based on the situation defined by these quotes would suggest these business would need to be lean to survive.

  47. boconnor
    May 15th, 2009 at 17:04 | #47

    PeterM says: “Peter Smedley and Mayne investors found this out when they tried to squeeze costs out of the these institutions.”

    Interesting case study. My recollection of the problems that Smedley and Co. had in attempting to reduce costs in private hospitals was the strong resistance by the visiting medical practitioners (specialists). As I recall they used their power to allocate patients to hospitals to redirect their patients to hospitals that were more conforming with their idea of costs (that is, those private hospitals that were prepared to pay them more for an event of service). So in effect there was a reduction in revenue to the private hospitals that tried to put pressure on specialists to rein in costs.

    “A simple Michael Porter type competitive forces analysis based on the situation defined by these quotes would suggest these business would need to be lean to survive.”

    I’m not so sure about this. It is not clear that the market for private health services is actually competitive, which would normally drive down costs. There are significant barriers to entry in establishing private hospitals, which presumably would allow a producer surplus to occur. And if it was the case that private hospitals were truly “lean”, then we would expect unit costing for a specified procedure to be lower than public hospitals but the reverse is the case.

  48. paul walter
    May 15th, 2009 at 18:15 | #48

    Am appreciative of boconnor and Peter M’s contribution, but still keep pondering what it is that a health system is supposed to do.
    Exchange value v use value.
    Is it about ensuring adequate opportunity of access for people with illnesses, or just another form of middle class one upmanship, with built in situational bads to ensure that resources are wasted on cosmetic surgery and the like, while genuinely ill people still miss out?
    What is the real value of a (scarce) resource?

  49. boconnor
    May 15th, 2009 at 19:56 | #49

    paul walter @ 48. “but still keep pondering what it is that a health system is supposed to do.”

    Short answer: fix up people who are sick.

    Longer answer: provide medical services to those who require them, according to priority medical need, so that the average pain and suffering measured across all people after the intervention is lower than the average pain and suffering they felt before the intervention.

    There is no cast iron answer to whether priority medical need is necessarily being met, although in Australia it does seem that those people with a high priority (for example emergency cases, cancer patients) get faster access than those who may be judged as being able to wait for a medical service.

    I don’t see it as a form of middle-class one-upmanship, although to be honest I don’t exactly know what you mean by that. If it is another word for middle-class welfare, then it seems to me that high quality medical services are what you expect in any advanced society. If genuinely ill people miss out it may be because of factors like isolation (being in a remote part of Australia) rather than not being part of a favored stratum in society.

    The question of scarcity is interesting. Because it interacts with the question about how much money do we want to spend on health services. If you want to reduce the waiting lists for those with a genuine medical need then there is an argument that the amount of investment by society needs to be greater. And there are plenty of areas of government expenditure (subsidies for industries that are successful at lobbying for instance) that could be reduced in order to pay for it.

  50. PeterM
    May 15th, 2009 at 23:34 | #50

    To bocnnor #47

    I apologise but I think we are arguing at cross purposes. I was talking about private hospitals/clinics because that is where most of the administrative costs in the private system are incurred. (Not the medios that use them!) I feel the hospitals operate in a competitive environment but they are sandwiched between an oligopoly of private health funds and monopoly medical colleges. You are completely correct about the medico’s using their market power to bring Mayne back into line by boycotts and the like when Mayne tried to appropriate some of the returns in the industry for their share holders. (Typical behaviour one would expect from a monopoly.)

  51. PeterM
    May 15th, 2009 at 23:36 | #51

    To paul walter #48.

    There is a whole lot of good stuff in Wikipedia on health systems and the like. Start at the following URLs and follow the various links:

    http://en.wikipedia.org/wiki/Health_systems

    The goals of a health care system are multi-faceted but the World Health Organisation lists these as; “good health, responsiveness to the expectations of the population, and fair financial contribution.” It is interesting that the WHO have come with a couple of indexes. These are “Level of Health” and “Overall Health System Effectiveness”. The following URL ranks national health care systems on these indexes.

    http://www.who.int/whr/2000/en/annex01_en.pdf

    What is always used against USA style private medicine based health care systems is the fact that USA ranks fists in the expenditure per capita but only ranks 37th in system performance and 72nd in level of population healthiness. Ranking just ahead at 36th in system performance and 25th in population health is Costa Rica that achieves this performance with a about a twenty of the expenditure per capita. (Costa Rica expenditure ranks 50th). Australia ranks 32, 39, & 17 on system performance, population health, and cost so we not that much better than the US. (I guess this is to be expected as we have spent the last 15 years trying to replicate the USA private health system.) Commentators explain the difference in performance between USA and Costa Rica on the fact that the Costa Rica system focuses on preventive measures.

    Personally, I think we have a serious problem with the current Australian system. Given the amount of noise being generated by the current federal opposition in repose to a relative minor change to slightly reduce the inequities in the system, I don’t hold a lot of hope for any changes until the system disintegrates in crisis. (Like the USA system is about to do.)

  52. May 16th, 2009 at 02:01 | #52

    i think terje you could mount a good case that deficits in all industrialised nations in Europe, north america and japan are the faulkt of kevin rudd,

    Smiths – don’t be stupid. Governments are responsible for their own actions.

    Terje, just wondering what your views were on private debt. Most hardcore laissez faire types cannot tolerate a single cent of government debt, but aren’t the slightest bit concerned if private debt balloons to 5x GDP, and its all blown on a housing bubble. Where do you stand?

    I believe in personal responsibility. I don’t think we have enough of it. Persponal responsibility is the opposite of collective responsibility which we have too much of. People should be responsible for their own actions and should wear the consequences of their own actions. As such private debt is a private matter and should remain so. Mostly it does unless governments decide to intervene (which mostly they shouldn’t). I’m not worried by private debt, although I work hard to avoid having too much of the stuff myself.

    I think public debt is problematic because:-

    1. it distorts the democratic process by defering the cost of government action to a later regime.

    2. because it entails spending that does not need to pass a cost benefit analysis with the same rigour as private investment. You can avoid this to some extent by limiting public debt to public corporations that have a capacity to default separately to the government. This sharpens the focus of the lenders.

    3. It crowds out private borrowing.

    Having said all this I do think major government funded infrastructure, if it is to happen, should in general be debt financed. Capital expenditure should be debt financed and operational expenditure should be tax financed.

    Unlike Keynesians I don’t think government spending has merit for it’s own sake.

  53. boconnor
    May 16th, 2009 at 03:21 | #53

    TerjeP says: “it distorts the democratic process by defering the cost of government action to a later regime.”

    How specifically is the democratic process distorted? For it seems that each government knowingly takes on the consequences of the decisions of the previous government (including debt) and does their best to govern based on the policies they have enunciated to the electorate. They have strategic power to change expenditure patterns to reduce the amount of debt, or indeed increase it, if they think that is the best thing to do for the economy.

    “because it entails spending that does not need to pass a cost benefit analysis with the same rigour as private investment.”

    If your claim is that private sector managers use more rigour compared with public sector managers in the way that they take on debt then I think that claim is not true.

    The corporate world is littered with companies who have taken on too much debt to the extent that their lenders have put them into administration or liquidation. Indeed the major cause of company failure is companies that have taken on too much debt, which presumably would not occur if a proper cost benefit analysis had been undertaken with sufficient rigour.

  54. May 16th, 2009 at 04:23 | #54

    If your claim is that private sector managers use more rigour compared with public sector managers in the way that they take on debt then I think that claim is not true.

    It is more a point about those that extend credit. When you extend credit to a private business you generally want a solid business case. When you extend credit to a government you generally just want to know that their tax powers still work.

    How specifically is the democratic process distorted?

    A government that borrows and spends can hand around a lot of lolly and make us feel good. The pain (ie repayment) is deferred to a later regime. This is more a comment on the psychology of voters than on the mechanics of democracy. Everybody loves Santa.

  55. smiths
    May 16th, 2009 at 16:31 | #55

    sorry terje,
    but saying “The deficit is the ALPs fault,” is stupid, its simplistic and offers nothing constructive

  56. Alice
    May 16th, 2009 at 20:44 | #56

    55# Terje knows better than that dont you Terje? Saying “The deficit is the ALPs fault,” takes the wooden spoon stirrer award.

  57. May 17th, 2009 at 07:45 | #57

    The ALP don’t regard it as a fault. They try to blame it on a revenue slump for political reasons but in reality it is predominantly a spending hike. However they call the shots and clearly they think that now is the time to run a government deficit because they beleive that is how you motivate a sluggish economy. There is nothing simplistic or stupid in stating the truth. Rudd and Swan had a choice in how to respond to this recession and they chose deficit. To suggest that they had no choice is the position that is simplistic and stupid. You may agree with their choice but don’t pretend that it wasn’t a choice.

  58. Alice
    May 17th, 2009 at 08:09 | #58

    57# Howm many industrialised nations are now in deficit Terje? Why? Because of the GFC. Your argument the deficit is the fault of the ALP is misleading. They did have a choice and they made the right choice, as did many other industrialised nations. What would you suggest Terje? Attempt a surplus by drastically cutting expenditure to match falling tax revenues, when the unemployment rate is rising. How many more would you see thrown into the ranks of the unemployed Terje to land yourself a boutique surplus? The unemployed also pay less tax and can engage in less entrepreneurial activity, further contributing to falling tax revenues. Attempting a surplus now would not only be insane, its a “wrench the economy down” recipe for a disaster.

  59. SeanG
    May 18th, 2009 at 04:37 | #59

    Alice,

    A couple of things about what you have written.

    Firstly, many developed nations were already in deficit when the credit crunch occurred. Australia was one of the few who were running a strong surplus.

    Secondly, as countries go into deficit they have to borrow. Now in order to sell bonds we need buyers who are prepared to purchase AUD Federal Bonds. Downside risk is that because the US Treasury is issuing hundreds of billions in bonds and the same in the UK and the Eurozone, that we will move to a point that there is a buyer’s strike. Now, I doubt that will happen because our economy is relatively stronger than others but we need to recognise that this is a risk.

    But I agree that we need a deficit via automatic stabilisers but I disagree with arbitrary stimulus packages. I would prefer something which actually has a greater long-term stimulatory impact than $900.

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