California Death Spiral- Which One?

I read Paul Krugman’s New York Times column for the same reason I sometimes read the Huffington Post- I love to listen to his musings on the economic apocalypse from which only a strong federal government can save us.  Krugman advocated federalizing the banks and a far larger stimulus program, with funds borrowed from abroad, as the solution to our economic crisis. Reading Krugman is like visiting an alternate universe in which markets are evil, and capital requires taming by our political system.  Where wealth is actually created in Krugman’s universe has never been entirely clear to me.

When I saw this morning’s headline about the California death spiral, I had a fleeting sense that maybe he was going to talk about the “higher taxes-growing deficit-fleeing jobs-declining tax base” death spiral that is California today. But no, he was talking the “health insurance” death spiral that is California’s individual health insurance market that only health reform can fix.  How, exactly, health insurance costs would be reduced, or increases moderated, by the current package Krugman does not successfully explain. Perhaps the next column on imposing price controls on health insurers or the health sector will clear up the mystery …

Presumably Krugman expects a strong federal government (whose health spending is presently growing by double digits) to do this.  Putting Katherine Sebelius and Henry Waxman in charge of California’s health insurance market does not inspire me with visions of moderating costs.  What about you?