Dishonesty

As you can see from “The wolfe Plan“, I’m no big fan of the role that insurance companies and their teeming bureaucracies play in our health system.

But I do believe, perhaps very naively, in being at least basically honest about the world that confronts us.

For example, I’m embarrassed to admit, I was completely wrong about the probity and propensity to engage in rational enlightened self-interest of major Wall Street players. I’ve not remotely changed my views about the merits of the free market (Capitalism, baby!), but I have changed my views about a dysfunctional managerial class that seems intent on plundering the wealth of both shareholders and taxpayers in order to feather their own nests.

So much for enlightened long-term self-interest.

But my point is that I admit this. I recognize the lacunae in my thinking, and I adjust. I examine what elements of my world-view need to be changed. (For example, George W. Bush’s attempt to privatize Social Security would have been an unmitigated short-term disaster had he succeeded along the lines he planned).

Smart people do this. Honest people do this.

No one ever accused most politicians of being smart. Or honest.

Case in point, one Senator Harry Reid.

Here’s Harry Reid talking about the evil insurance companies:

As for insurance companies, “There isn’t anything we could do to satisfy them in this health care bill. Nothing,” Reid said. “They are so anti-competitive. Why? Because they make more money than any other business in America today. . . .What a sweet deal they have.”

Now the nice thing is, this is a statement that is either true or false. It’s easy enough to fact check Senator Reid. And this is a claim he’s repeated again and again.

Clearly he can’t possibly mean what he literally says: that they make more money than any other business in America today. They don’t. Not remotely. You can look it up, but oil, gas, telecoms… they all make hundreds of billions more a year than the health insurance companies which are way, way, way down on the list. (Probably in the top 50, definitely in the top 100, but that’s not exactly anywhere near number 1. You can extract it from the link below, but you need to strip off the trailing “B” in market cap in order to be able to divide market cap by P/E to get nominal industry earnings. I’m too lazy).

I did try a few; FWIW, soft drinks ring in at 7.1 bn, health care plans at 9.2 bn, breweries at 26.2 bn, and foreign telecom services at 209 bn. So, a little more profit than sugared water.

OK, Senator Reid can’t be a total idiot or liar, he must have meant something different. Like maybe their profit margin is the highest. In other words, they make a lot more money on every dollar than any other industry in the US!

That makes sense!

Where are they? Here, thanks to Yahoo Finance (hat tip Professor Mark Perry), we see that they are … number 86.

Behind … well behind just about everyone. A third the profit margin of breweries.  Less than half the margin of soft-drinks, encumbered by insane marketing costs. (The gross margin on soft drinks is very high, but once you’ve factored in marketing, sales, and distribution overheads, it’s no longer as excitingly rapacious a business).

I’ve looked closely at the numbers, and there is no possible way that Senator Reid can be telling the truth.

Worse, he’s been saying this for months. He has to know he is not telling the truth.

Why does he do it?

Why does he tell such an obvious lie?

I wish I knew. But in this instance it seems clear that Harry Reid does not seem to be attempting to deal honestly with the world as it exists. A zealot, of any stripe, that refuses to deal with the truth, is a very dangerous man.

-wolfe

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