Monday, April 5, 2010

Health Care Reform?

H.L. Mencken once said that “Every election is a sort of advance auction sale of stolen goods.” The majority of the political process is deciding which favored groups get what. It is important to understand that with all spending bills, some people undoubtedly benefit whether they be a Wall Street CEO, a mid-western farmer, or an inner-city homeless person. This is the visible effect on which most people, even renowned economists, focus and rely to determine their opinion of the efficacy of a policy. This focus is also what makes for a poor economist – renowned or not. Henry Hazlitt wrote in his great book Economics in One Lesson, “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” Hazlitt further wrote, “Nine-tenths of the economic fallacies that are working such dreadful harm in the world today are the result of ignoring this lesson.”

There are definitely a lot of misconceptions about health care. The bigger picture should be explored in regards to health care intervention so we might attain a better grasp of where we stand. First, the current system is mixed with a large regulatory apparatus including subsidies, licenses, controls, patents, monopolies, and outright welfare. Government makes up 42% of all health services and supplies spending.[1] 75% of all citizens over the age of 65 are provided for by the government. Conservatives are wrong – we already have government health care. This bill just increases what we already have. A common misconception about our current system is probably epitomized in the town-hall exchange between Congressman Bob Inglis (R) and one of his constituents in South Carolina. The man charged that Inglis should “keep your government hands off my Medicare.”

The current legislation is basically a continued effort to repair a failed system that has been fiddled with for nearly a century. The first national conference that declared for universal health and social insurance was in the 1910s. It has taken 100 years to get where we are today and Obamacare isn’t even proposing anything that is close to total socialism of medical services regardless of purported intentions by opponents. The problem with socializing even just a bit more of health care is that it will produce exactly the same results here that it has everywhere else. We will increase over-consumption, rationing, and stagnation. The problem is that without freedom of exchange and market pricing, economic sense disappears and the system becomes entangling and impoverishing.

There is another component rarely mentioned beyond casual concern. How do we pay for this sublime utopia of health parity? The government can’t pay for this by taxing everyone because citizens wouldn’t allow for it over the long term. The national debt is already enormous. We should look no further than the Federal Reserve. They will run the presses to pay for these foolish dreams. The Fed makes something like this possible – without it - no politician would make such bold promises. The real problem may not be the impossible visions of politicians. It may be the institution that allows for such foolery, and it comes at our own expense. Inflation through fiat currency is one of the most insidious mechanisms ever introduced to an economy.

We should be mindful that worsening the system of medical purveyance is only part of the defect of universal health insurance. The unseen costs will include worsening business cycles, depletion of the dollar, and destruction of private wealth via inflation which will be spread equally (ironic?) among all individuals whether rich or poor. I’ll close with the wisdom of Frederic Bastiat, the French economist of the 19th century:

“In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause – it is seen. The others unfold in succession – they are not seen: it is well for us if they are foreseen. Between a good and a bad economist this constitutes the whole difference – the one takes account of the visible effect; the other takes account both of the effects which are seen and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favourable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a small present evil.”

1. Health Expenditures by Sponsers. (PDF)

No comments: