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Today's Commentary: 01.31.07
Seizing the Comparative Advantage
By Paul Petillo
A.O. Scott, film critic for the New York Times wrote the following: "The apology is a notoriously tricky speech act, one that involves expedient self-exculpation rather than a genuine plea for forgiveness from another". Following an essay I penned last week outlining several ideas I had for President Bush on the eve of his State of the Union speech (specifically on the topic of health care), I received numerous criticisms. I would like to share several of them with you largely because they represent a good cross section of what was waiting for me in the days following the publication of the column.
The first came from Robert. I was able to ascertain several facts about the author of this decidedly bitter email. He is apparently retired after years working in a welfare office where he writes,
"I worked in the welfare department for many years, at several locations in a very big city. I began with a strongly idealistic view. My attitude was extremely generous. I was very forgiving and magnanimous towards people of all classes, races, etc.
Gradually, and unavoidably, I began to understand. Welfare is a form of theft. It helps no one. The government provides it, not because of any socially beneficial outcome, but because it justifies their own jobs. If you had ever been in that bureaucracy as I have, you would know this to be true. As crude and as unkind as this assessment might seem, it is completely the truth. The men and women who write those laws have zero knowledge and zero understanding of how those laws affect private individuals. They talk well. Their words seem to make sense, until you understand certain things."
His note revealed additional information about his thinking and I began to wonder if I had made my point as clearly as I had hoped. In a post-script, possibly to answer a question I had yet to ask or to further quantify his argument he added, "And yes, I do take care of someone. I am the sole caregiver to my 97 year old mother, who has Alzheimer's and is diabetic."
Robert's problem with what I advocated in the essay "Forgiven: The Penance that comes with the Sin" seems to revolve around the suggestion that the government should step in and provide the social net needed to close the insurance gap in this country.
I wrote: "The best way to fix this problem would be draw on the wisdom of foreign plans. Culling the best ideas from around the world would be far better than his 'robbing Peter to pay Paul' approach.
"For example, he could force private carriers to create a universal plan of preventative care for everyone. This type of care has been proven to decrease the overall costs of insurance plans and would allow policyholders to pick and choose their coverage beyond those initial limits. The government could easily cover these costs and in the process, force private carriers to compete for additional coverage.
In response to his claim that, "If you advocate mandatory insurance, or government payouts to needy people, you are advocating stealing. Absolutely do not give the government the responsibility, because all they will do is f*&% it up.
I wrote the following response.
"This isn't about welfare. People who have no insurance are not always among those who choose to do without. There are 47 million people in this country who are faced with disaster every day. Everything they work for, everything they strive for, everything they dream of can be wiped out with a single unexpected malady. These are not the fringe players. These are not the people who tramp into the welfare office looking to game the system. These are your neighbors, your friends, and the faces passing you on the street. Worry about retirement? Not these folks. They worry about what will happen when and if they get sick.
"Gamblers understand risk and reward. True gamblers understand the nut. The 'nut' is a term for bringing home enough to make the minimum living expenses. Do the uninsured gamble? Yes. They take a chance that they will get by, save themselves a thousand bucks a month, and hope that nothing happens. Among 47 million possibilities in a 365-day year, the odds are not so good that they will win the bet.
Government sponsored insurance can work. It won't be welfare. You will pay but the costs will be spread across a larger demographic. You will be better able to perform your job if that burden is lifted. You will be better able to save for retirement if you no longer have to make the choice between insuring your kids and yourself. Insurers determine risk and raise premiums to meet those risks. In doing so, they have priced out a third of the population. I'm not looking for fairness. I'm looking for a solution. Something needs to be "hammered out" and it won't come in the form of tax deductions.
"Insurance is not like home ownership. It is not a roof over your head. It is the floor beneath your feet.
"I mention in the essay that many people are uninsured because they carry the burden of a previous illness. Insurance companies will search deeply into your past for any reason to deny you what your neighbor has. They will examine your credit. They will examine your medical history. They will examine your work history. Sure it is a business and yes, we need to be protected from ourselves. But when they are the casinos, they set the odds.
"What I advocate is preventive care. Only the government can force the cost of this vital part of medicine down by increasing competition among private insurers. Turning the job to private industry is counterintuitive.
"This is uncharted territory. We have seen it work in other countries so we do not need to be the pioneers but innovators. We can do something spectacular with this problem."
To which he responded: "That's an ignorant myth. You don't know any of these things about me. Not any of them is true about me.
"This is what I'm against. You are wanting [sic] to determine what I should do with my money. And you are wanting [sic] to institutionalize it in the government's hands. They would use force to impliment [sic] it and enforce it. That's theft.
"The only person competent to determine what I should do with my money is me [sic].
"I want you to keep your filthy hands off of it.
"When it comes to which one of us knows more about how government really works, and about who suffers and how, I know more about that than you do.
"You're trying to sell a program, that's all you're doing, and I'm not buying it.
"We're through with that kind of thinking.
"It's junk.
"If you want insurance, buy it.
"But don't force other people to spend their money the way you think they should. That is improper behavior on your part.
"Your statements are high-minded. What we need is leadership that is down-to-earth."
***
Steve on the other hand took a slightly different approach to the subject.
"Sir, you would do well to study history and Austrian economics. Then you could leaven your utopian yearnings with reality. Experiments with big government/universal healthcare solutions have failed to deliver efficient, timely, quality healthcare everywhere it has been tried. And, tax cuts have resulted in increased tax revenues to the federal coffers every time they have been implemented.
"The basic lie of socialism posits that we can all live well at someone else's expense. In America, we used to understand that equal opportunity for all was a worthy ideal. Now, a shocking and silly voice calls for equal outcomes. We can have excellent healthcare. We can have social justice. We can have low taxes. How? If each citizen accepts responsibility for his own existence. [sic] There's a novel idea."
Now that's more like it. At the very end of this, I will offer some additional thoughts that were, regrettably not included in my response Steve. Here¹s how I responded.
"Thanks for writing. I appreciate your view.
"But I was only suggesting two things: we can learn from those historic mistakes and create a hybrid that protected the weakest first and with any luck, and I use the word luck with great intent, affordability will permit those that choose to, insure themselves. I'm not talking about a taxpayer-supported system.
"Which leads me to the second item: preventative care that is so affordable that it would be unavoidable. One sixth of the 47 million uninsured are children. No one can refute studies that report healthy children will grow into healthy adults. Few can refute that healthy children will have less school absenteeism which will lead to better educated adults and a self-supporting citizen able to stand his or her ground. (I cannot mask the way that sounds.)
"I believe that each citizen does accept responsibility for his or her own existence. But as if often the case, some citizens are responsible for other, less independent citizens.
"Caring does not make me a socialist, less historically informed, or a disbeliever in the Austrian school. This conversation would be unnecessary if we had followed, from the beginning, the views of Anne Robert Jacques Turgot. He believed, I seem to recall, that the privilege given all government connected industries should not be allowed under any circumstances. Imagine the billions we would recover from such a policy. I believe in private market pricing but in only a few instances will you find it without some government interference. Disentangling the government from the numerous businesses it currently contracts with would be a Herculean effort.
"So why make health insurance the battleground? Why not farmers or any of the other numerous industries subsidized by Uncle Sam for one good reason or another? You are right on all of your points. I'm not arguing the validity of what you are writing. I just think that there are other places we could practice good old fashioned Austrian economics without making health insurance the test case.
"I don't see the attempt to create an equal outcome an intervention (Boehm-Bawerk's Positive Theory of Capital). I see it as a chance for the government to redeem its best quality, the care of its own citizenry first. (I cannot mask how that sounds either.)
"Once again, thanks for writing. I always enjoy the opportunity to clarify my point while reading those of another. As I said, perhaps, with luck, we will find a solution that will satisfy both of us. At least, the conversation has begun! Let's see how it ends."
* * *
In an effort to tidy up this discourse I should also mention that governmental intervention, the kind the Austrian school so despises is happening on a global scale. As trade barriers fall, governments are stepping in to promote their country¹s best industries. The United States does it and seeks to protect its place in the market, most recently by seeking to deregulate its financial markets to better compete with London. And while I might disagree with some of these policies, the effort only seeks for their countries what economist David Ricardo called comparative advantage.
Here in the US, we have seen a good many industries that were once considered our own migrate overseas. Trade barriers are always bound to fall. But the downside of such changes leaves many of our citizens at a disadvantage.
At a recent meeting of the American Economic Association in Chicago, Turkish born economist Dani Rodrik suggested that increasing the social safety net is the best way to offset this type of economic shift. To argue that the government should not have a hand in making the transition easier on its citizens would be turning a blind eye on what the competition is doing.
We can begin with health care and see what happens. Removing the onus of providing for employee¹s well-being would only allow those industries under the most pressure to flourish with healthy employees. Assigning that obligation to the government and not the private sector will give these workers a better sense of belonging to a nation that cares.
If not, the theory that all boats will rise in this global marketplace might well turn to be wrong. Is it fair to allow American boats to meet the new watermark, well below the one we are accustomed without help? I don¹t think we should. Instead, we should do as we always have done and intervene.
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