Friday, July 28, 2017

Crisis Scenario

A couple of posts ago I talked about the generational theory of history and how it predicts that the present chaos will rise to a climax some time within the next ten years, and then be resolved by a general tearing down of old institutions and a building up of new ones. That process may or may not be violent.

It's natural to want to think of nonviolent ways the crisis could be resolved, but until today I was coming up dry. Today I hit on a possible peaceful way out of our current early-1930s-style malaise. Mind you this is not something a few people can bring about voluntarily. It has to just happen. Also, even though people won't be shooting at each other, it will still lead to major disruptions of many of our assumptions about how America functions.

It starts from the notion that the crisis was brought on by failed institutions. Government, universities, corporations, and the international banking system took the forms we know today in response to the problems of the 1930s and 1940s. Those problems have been solved for decades. The European powers are not at war with each other nor is continental Europe in ruins from years of war. There are no colonial governments trying to keep the lid on nationalist movements. No Americans are living without food, medicine, heat and light.

But there are new problems. Millions of people are expecting old-age benefits that cannot possibly be paid. Young people have to incur heavy debts just to have a shot at a middle-class career. Military threats come from "non-state actors." The entry of billions of poor people into the global labor pool has dented the economic prospects of workers in developed countries. The institutions set up to solve the old problems are utterly unable to solve these new problems. The crisis will not resolved until those institutions are replaced.

To show how this may come about peacefully, I'll take the best example I can think of, which is the healthcare system. That system, which is run by politicians, employers and insurance companies instead of doctors and patients, is a twelve-headed monster that grew out of the need to attract employees during the 1940s when the whole workforce was being soaked up by war production. Wage controls meant you could not entice people with high pay, so companies offered medical insurance as a fringe benefit.

Seventy years later, you pay for your annual checkup like this:

1. Earn a wage
2. Your company takes part of your earnings and kicks in some extra and gives it to an insurance company. You pay some of the earnings in federal income tax.
3. An insurance company receives money from you and also from various federal programs that distribute the income taxes paid.
3. You go to the doctor. You have no idea how much it costs because there is no list of fees. There is no list of fees because they charge everyone a different amount. The doctor might order a test, which you will of course agree to undergo, but nobody will be able to tell you how much it will cost.
4. The doctor sends a bill to your insurance company. The insurance company reads thousands of pages of federal regulations to determine how much of the bill it is legally required to cover. Then it possibly pays part of the rest of the bill depending on your insurance plan, whether you've met your deductible, your copay, and so on.
5. The insurance company tells the doctor's office how much he'll receive, which may be different from what he billed.
6. The doctor's office may dispute the charges or may just accept the payment. The doctor's office may also discover that you gave them your cousin's insurance card, in which case they are what CPAs refer to as "shit out of luck."
7. The insurance company pays the amount that was agreed as appropriate.

Before the 1940s, if people had medical insurance at all, it was "major medical," which only paid for unpredictable treatments like accidents or cancer. For your annual checkup,

1. The doctor said, "I do checkups for $10."
2. You got the checkup and paid $10.

Obamacare claimed to be a reform, but it only enlarged the role of the government and insurance companies in this circus of insanity. It is a classic Hail Mary maneuver of a system unable to solve problems because the solution would demand that the system itself be scrapped. Some people think a single-payer system would make everyone happier. They imagine such a system would be run by consultants from the Harvard School of Public Health. But in fact it would be run by Congress. If you have confidence in Congress, you're in a small minority these days.

What's the way out? Things are brewing. Many doctors already don't accept government insurance and a few don't even accept private insurance, because the hassle just isn't worth it. They take payment in cash and do fine for the most part. But it's no longer legal to opt out of the system. The law says you have to buy insurance (at inflated rates because of mandated coverages you probably don't want) or pay the Obamacare mandate penalty. So you have to be pretty burned up at the insurance system to pay your mandate penalty and pay cash to a cash-only medical practice.

The government's ability to charge you the penalty depends on its knowing your income. But what if a company paid its employees in cash, or Bitcoins or some other untraceable cryptocurrency? Lots of small businesses, especially family businesses, pay employees under the table in order to avoid taxes. The idea is there; all it needs to do is spread. And spread it may, because the healthcare system cannot control costs. Is it unthinkable that a penicillin shot "within the system" might cost you $1000 in a few years? It's no more unthinkable than paying $28 for a Tylenol or $500 for a drive-by consult you never asked for while you're in the hospital, and that happens all the time. When things get so bad that people can't afford the care they need within the system, they'll go outside the system.

I see it happening first in the software industry. A small company will say, "We'll pay you the equivalent of 25% over market in the form of Bitcoins, and we aren't too curious about what you do with them."  Then you pay your doctor in Bitcoins. Things may break down to the point where the IRS just doesn't have the resources to stop it. And once it reaches a critical mass, no company will be able to survive unless it does the same thing. It's like illegal immigration. One desperate construction company back in 1985 takes a chance on hiring some illegal immigrants and paying them under the table; they get away with it and thirty years later it's the norm and companies that try to do things legally can't make a profit. And the feds can't, or won't, do anything to stop it.

Eventually, the old insurance system would go bankrupt because nobody would be paying into it. It's possible that those who benefit from the old system might take to violence in order to preserve it - people underestimate the selfishness and detachment of the elites from the problems of average Americans. But I think that is unlikely. That's just one example of the general idea of alternate institutions growing up to replace the old failing ones in nonviolent, gradual, innovative ways that require just a wee bit of lawbreaking. This example is of course totally illegal by current law. But remember, the crisis can only be resolved by radical restructuring. At least in my scenario, nobody ends up hanging from a lamppost.