As I write this, it appears likely that Congress will approve spending $700 billion to bail out financial companies whose risky investments came back to bite them. They don’t really have a choice, of course, since the alternative is even less savory. Even Warren Buffett says the alternative is "the biggest financial meltdown in financial history." Gee, everybody said things were great until just a few months ago.
Some of that money may be repaid in sales of assets, but that’s only slightly likely. In the worst case, the national debt jumps to $11.3 trillion, the dollar tanks even more against more stable currencies, and inflation jumps along with unemployment. Foreigners start buying everything in sight at fire sale prices. All of that reduces tax revenue.
Average citizens are hopping mad that Wall Street is dumping its garbage on Main Street, which seems to have surprised the Washington insiders. They’ve been burned before by false declarations of national urgency (chasing nonexistent WMDs in Iraq). As in that situation, the demand is that full trust is put in a very few hands inside the administration to spend the money wisely and to prop up a system that isn’t working efficiently.
It looks like the same government insiders helping out their private industry pals behind closed doors. It doesn’t help that Treasury Secretary Hank Paulson’s last real job was CEO of Goldman Sachs, which made a bundle on subprime mortgages and short selling and gave him compensation of up to $37 million a year and a net worth reported to be $700 million (giving Sachs a nice position as all of its competitors are now out of the picture and making Paulson something close to the CEO of the country when the bailout passes). Or that his views on exactly how much the socialist-like help Uncle Sam should give failing financial houses seemed to change day-by-day as the government reacted to the crisis only after it happened.
Those who pay their bills and taxes on time will suffer. Those who don’t, the same folks who simply walk away from financed cars whose value is "upside down," are likely to take advantage of loose bankruptcy laws and simply stop paying for houses worth less than they owe, reducing the value and future prospects of Uncle Sam’s cash flow stream on so-called "toxic" investments (homeowners were speculators, too, after all). And, there’s no guarantee that banks will start lending again just because they get to dump their failed bets onto the backs of taxpayers. Formerly affluent neighborhoods may look like Rust Belt cities, full of boarded-up houses that the collapsed real estate market can’t absorb.
Unemployment is reminding middle income citizens of just how much wider the gap has become between them and the highly compensated CEOs, and more than 1,000 billionaires whose net worth jumped a lot more than theirs, especially since the homes and 401ks of the average citizen suddenly don’t look so lucrative. The illusion that all of us were getting wealthier together has been shattered. The "have nots" will likely use the one advantage they have — at the polls — to punish those they see who prospered while they didn’t.
Some reactions seem obvious. Democrats will claim it’s yet another example of Republicans favoring the wealthy and will benefit at the polls, yet they won’t have anything left in the federal till to pay for their expensive social programs even if they win offices. The financial industry will wither, with high unemployment and a loss of luster that may never be regained. Taxes will rise, entitlements will finally have to be curtailed, and uncompensated healthcare will certainly rise with unemployment and debt.
Here’s where you come in. HIStalk has a lot of smart readers, some of them in the investment industry and in executive positions. What will the impact be on healthcare and, specifically, healthcare IT? Click Comments at the end of this posting to share your thoughts, maybe thinking about these areas:
- How will hospital IT spending change?
- Will physicians keep buying EMRs?
- What exposure do vendors (publicly traded and private) have to changes in financial conditions?
- Will market conditions cause vendor consolidation and discourage new entrants?
- What changes can we expect for HIT industry employment?
- If healthcare costs have to be dramatically and painfully cut, can IT justify its cost?
Nobody else is talking much about this. It’s not about politics, but about reality. Let’s hear what you have to say.