The Bond Market vs. Obamacare

So, it turns out the people who handle federal debt for a living do not believe the persistently repeated claim that Obamacare actually would reduce the national debt:

Treasuries rose, pushing 10-year note yields down from a six-month high, as a federal judge ruled against the U.S. health-care overhaul, easing concern that the government will struggle to contain record deficits.

Bonds also advanced as less U.S. debt was submitted to the Federal Reserve in its buyback today. Treasuries dropped earlier on speculation Congress will support economic growth by passing President Barack Obama’s agreement to extend tax cuts.

“The latest bump-up in Treasuries comes from the ruling about Obama’s health-care being unconstitutional,” said Larry Milstein, managing director of government and agency debt trading in New York at R.W. Pressprich & Co., a fixed-income broker and dealer for institutional investors. “If we are not going to be spending a trillion dollars over the next 10 years it’s a significant reduction in deficit spending, which means less debt being issued.”

But getting rid of the mandate does not get rid of Obamacare in toto, and, in fact, it makes the economics of it even worse: As things stand, insurance companies still will be required to cover those with pre-existing conditions, and now nobody has an incentive to buy insurance before he gets sick.

Two obvious options if the mandate stays thrown out: One is that Congress decides to keep all or most of the rest of Obamacare, replacing the individual mandate with gigantic subsidies to the insurance companies to offset costs associated with the pre-existing conditions rule. There are many insurance companies that probably would be happy with that arrangement, if the subsidies are fat enough. The other option is a more or less complete repeal –  which is the better option, and therefore the less likely to happen.

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EDITOR’S NOTE: The following is Jonah Goldberg’s weekly “news”letter, the G-File. Subscribe here to get the G-File delivered to your inbox on Fridays. Dear Reader (But not Allegra Budenmayer, may she rot in Hell), Some of you may recall that my favorite essay by the late Tom Wolfe is “The Great ... Read More