Sunday, March 21, 2010

A Dark Day in America

With an astonishing display of fortitude and obstinacy the Obama administration and the Congressional leadership have managed to pass the healthcare reform bill.  The passage of this monumental legislation represents the first time such massive legislation has been passed without bipartisan support (both Social Security and Medicare were passed with Republican support).   It is yet another chip in the very foundation of the American system and a continued erosion of what once made America great.

The legislation was passed on the back of a deal between Obama and the pro-life Congressional Democrats, led by Bart Stupak (D-MI). Stupak’s gang of ten, who voted for the original House bill, were philosophically opposed to the Senate bill which, in their opinion, provided means for federal funding of abortions. Unfortunately for America, they were bought off by a promise from the President to sign an executive order the status quo, namely disallowing federally funding for abortions.

Obviously Obama’s pitch was convincing enough to persuade Stupak; however, it is unclear how permanent or effective the executive order will be. An executive order, which is lesser in force than legislation, can readily be revoked by any President, current or future, on a whim. While in his press conference, Stupak indicated that Obama promised not to alter the order; it is questionable whether such a commitment will remain once the pro-choice Obama is pressured by his constituents. Why Stupak was convinced that these prohibitions for federal funding of abortion-related procedures will remain unadulterated is mystifying.

But regardless of Stupak’s reasoning, the bill will now be signed into law. The so called reform unfortunately will do little to fix the problems in America’s healthcare system. The Democrats undoubtedly have had the best of intentions in trying to fix a broken system, but their turn to socialist policies undermines the very foundations of the American system. Not only does this gross expansion of government power undercut the individual liberties of every American, but it burdens an already suffering economy.

There is no doubt that the industry needed reform. Neither Republicans nor Democrats denied this. But, as has consistently been shown, in both theory and practice, the paternalistic strategy of controlling the production and distribution of economic activity creates more harm than good. Unfortunately, this healthcare package represents the naïve utopianism that sounds pleasant to the uninformed ear, but in reality is mere sophistry. The health insurance industry will remain a mess with the additional encumbrance of excessive government involvement and added burdens on the American people.

Regrettably for America, the passage of this bill will not signify the end of the healthcare debate. Republicans are already gearing up to revoke the bill either through future legislation or the court system. For instance, the constitutionality of the individual mandate to purchase insurance is questionable. The next few years will be littered with an abundance of lawsuits aimed at repealing all or part of the legislation.

Likewise, Republicans will seize on the argument of government excess in the upcoming November elections. The midterm elections will revolve around the issue of healthcare (and the economy) and will define the direction of America for years to come. Hopefully, the GOP will successfully be able to convey the message that short-run, government-led ‘fixes’, while throwing the average American small and temporary handouts, will ultimately do more harm than good. If they fail, America will continue its anesthetized erosion into a second rate nation.


  1. "The passage of this monumental legislation represents the first time such massive legislation has been passed without bipartisan support (both Social Security and Medicare were passed with Republican support). "

    If only I could believe that there was an honest attempt by Republicans to have a positive role in the process. Much is said of being shut out of the process yet 200+ Republican amendments were included in the bill. The content belies the lack of possible input and involvement.

    I believe instead that the unanimous Republican dissent was a strictly political strategy with little bearing on the underlying issues. It remains to be seen whether the "reward", the staunch support of the existing base and the fear-based support from the Fox News audience, will have been worth the price... the label of ineffectual, obstructionist party unwilling or unable to participate in the process of governing this great nation.

  2. Even if the cynical casting of Republicans as obstructionist and dissent has "strictly a political strategy" is true, such a strategy would fail if America supported the healthcare bill as is. The fact of the matter is that, if we start from your premise, this political strategy is only a strategy if it wins electoral support. America is decidely unhappy with the bill, that much is clear by all recent polls (Check RCP if you are curious). If Republicans are capitalizing on American disstaste, despite ideology they are at least listening to the people - a responsibility of elected officials.

    However, the fact is that their refusal to march lockstep with a socialization of yet another aspect of our system is ideologically based. Government control is not the answer. I do agree with you though that the Republicans have not played an overly constructive role this time around. A lot of this is due to the overwhelming control and exclusion by the Democrats. Part is also due to the fact that the Republicans had very few cards to play other than not voting for the bills. I do think though that the GOP should not only focus on undoing this disaster but simultaneously offering a replacement.



  4. The Democrats see the solution as simply taking over an industry, health insurance, and directly regulating a desired outcome. This is hubris. Ironically, health insurance is not really a driver of health care costs. But it a critical leverage point in the payment system from which the government can set prices and regulate the activities of hospitals and doctors.

    The Republican solution ought to rely and fixing our system of incentives to put production in line with consumption. The problem of the uninsured was never the major cost driver for health care costs. However, high insurance rates did serve to swell the ranks of the uninsured.

    Reforms to tie consumer choice to consumption of heath service could help release market forces to restore some balance. We need to address the concerns of a health care safety net separately. Medicaid was intended to be such a safety net, but the government run program is severely dysfunctional.

    Paul Ryan's proposal is a start in the right direction. Fundamentally health care has been so contentious because it strikes at the heart of two distinct ways of seeing the world.

    In one view free markets and inherently unstable and not to be trusted. Corporations are at least corrupt when not outright evil. So the problems of health care costs must be the result of unfettered free markets and corrupt corporations. If that is how you view the world, the natural solution is to restrict freedom in the markets and regulate the naturally corrupt corporations.

    In the other view, markets are the means by which a free people communicate their desires and negotiate the economic activity by which which desires are fulfilled. Government has its role, but a limited role to play in the affairs of a free people. Government because of it's coersive power, potential for corruption, and expansive tendency must consistently be held in check.

    Give such disparate world views, I am little surprises that common ground remains elusive.

  5. Mark,

    I think you hit on the very core of both the problems with the Democrat led fix and the reason for fundemental disagreement between Left and Right. It really is a conflict between the economic theories socialism and liberalism. Socialism, for better or worse, has become a dirty little word in America and so the debate has to be couched in other terms. Your assessment correctly points to many of the problems and a need for a fix that addresses them.

    I am just as unsurprised that common ground remains elusive. What is surprising, though, is that so many people are still committed to an economic principle, even if unwittingly, that has long been proven to be a dismal failure. It never ceases to amaze me that so many Americans claim to support capitalism/liberalism, yet even while claiming to be 'liberals' are unknowningly (for the most part) behaving as socialists or social-democrats. That's why I am a firm believer that many of these battles need to be fought on the intellectual level.

    Thanks for posting.


  6. If you want to fight the battle on an intellectual level, then by all means please do so and leave off with gross characterizations that serve the opposite.

    So, to start the ball rolling I'd like you to address the reality that the there are substantial components of healthcare that are difficult if not impossible to structure as a properly functioning market. At what point will healthcare companies, both insurance and providers, voluntarily make available data essential to consumers being able to compare "products" in order to make "rational" decisions about what to "buy"? Given what we've seen so far, I can't imagine this ever happening absent regulatory requirements. Moreover, when faced with any serious ailment or condition, what person in their right mind is going to "shop" for the best price?

    In the absence of the information and dynamics required for a properly functioning market is there really a viable alternative to a strict regulatory regime if costs are to be constrained?

    In a parallel vein, if it is not possible for the necessary dynamics/environment to exist, is healthcare even suitable as a profit driven sector of the economy? Perhaps we should be looking at healthcare more as a component of a robust national infrastructure necessary to support a thriving economy, no different than sturdy roads, bridges, rails and airports (and yes I get how big a component of the economy healthcare is, but that's part of the problem - it shouldn't be nearly so big)? Is this not really what our first world competitors have done (with a range of model options)?

  7. Joe~

    I think you make some fair points - particularly that information is necessary for "a properly functioning market". I don't think that it is outside the scope of the proper role of government in support of a free-market to require the flow of information. These types of regulations are absolutely necessary to make the market function freely. Regulations requiring the free-flow of information; however, are very different than restrictions on what a company can or cannot provide or certainly government involvement in planning of economic activity.

    As to individuals' behaviors, let's remember that health insurance is not healthcare. It is a financial rather than a health related issue. In this vein it is only one of many ways (most others are not really consider in the US, but that doesn't mean they aren't out there) to pay for healthcare. Health insurance is really a risk reducer, as all insurance is. It allows the individual to minimize a low-probability, high expense instance in exchange for a high-probability, low expense instance (fixed premiums). Since in general insurance is designed for long-term planning, most people should be able to make their rational decisions outside of the immediacy of a serious ailment (of course this is not always possible).

    The point is that our current model is far from the free-market. There are many changes that are necessary to be made, but greater government control is not one of them. Like any monopoly it breeds inefficiencies and undermines the growth caused by competition. Healthcare is not a public good and therefore there is no benefit for government involvement outside of ensuring the rules of the market are properly followed. If the government backed away from its meddling AND prevent meddling by any other one power you will see costs of both healthcare and health financing drop, increasing accessiblity and care.

    Thanks for commenting.


  8. Re: Healthcare is not a public good

    Well that is quite a statement. Would you argue that the CDC should be done away with then? That there should be no publicly chartered or funded hospitals or clinics (too bad for the folks in poor neighborhoods left with no healthcare providers at all I guess)? Toss the 100% government run VA healthcare system? (I suspect there would be a very vocal veteran's community that might not go along with that - despite the anecdotal horror stories from 20 years ago that continue to make the rounds - remember that Walter Reed is part of Tri-care for active duty military, not Veterans....)

    I would argue that the general health of the population is of urgent concern to all citizens, collectively if not individually, and certainly to business.

    If there were no public health infrastructure, what would the impact be of even a "mild" pandemic such as we are not quite done experiencing? Who would cough up the cash for DNA testing to identify cases of potentially deadly viruses (well, except for execs I guess), providing the critical information needed to forestall a devastating spread of disease?

    I think your assumption that steps exist that could be taken to make the healthcare market more "free" is badly flawed. As I apparently alluded to insufficiently clearly, the nature of healthcare is such that it cannot be made into a properly functioning "free" market. Sure, insurance can be better regulated and thereby better serve the proper purpose of all insurance - the current near monopoly situation in most markets makes a mockery of the concept of free-market, but suggesting that consumer choice based on better information can be an effective source of healthcare and thereby health insurance cost control is just not realistic.

    I'd add that the holy grail for progressives has no increase in government control of the provision of healthcare, and certainly no planning of economic activity. It is for the elimination of private-for-profit health insurance, replaced with a (substantially modified) version of Medicare for all, and absent that, the creation of a government run insurance plan to increase competition with the private sector.

    Given the reality that Medicare allocates a much higher percentage of the funds it spends to paying for healthcare - that allocation to be improved by the recently passed bills - than private-for-profit insurance companies; no advertising costs, no bonuses and a lower administrative cost structure with a fraction of the effort expended to not pay claims. There are also the huge efficiencies for providers who would no longer have to deal with multiple payers with different rules/requirements for each.

    Properly regulated markets work when there is a reasonable balance of power between supplier and consumer. This is most certainly not the case in healthcare/health insurance today and again I argue that it is both fundamentally not possible for it to be so and contrary to society's interest to pretend that it can be made to be.

  9. Joe~

    I don't think it is quite an extreme statement as it may seem. The key is that there is a difference between healthcare and public health - a difference in concept that is frequently missed in discussion. Public health is absolutely a public good, and hence the need for organizations like the CDC. Healthcare is a personal matter that is not public in nature. There is little public cost or benefit if I sit at home sick or have a broken arm.

    Now the general, and somewhat correct, response would point to the ramifications of lost days of work and other economic costs to society if individuals are sick and unable to work. However, this argument can be applied to nearly any aspect of human life. After all many if not all actions that individuals take in a social community have ramifications on others. Food for one can severly impact one's job performance - eating unhealthy can make one less productive. But very few people wish to designate control of food intake a public good, because of the gross intrusion on personal liberty. The fact that certain ramifications are felt by the community is not sufficient to define it as a public good, but merely a signal that certain structures should be altered to prevent externalties from affecting the community.

    I would agree, however, that there is some area of grayness between public health and healthcare. That is an intersting conversation unto itself - and probably much more nuanced and lengthier than the space we have here. Still that does not change the fact that public health and healthcare are two very different concepts.

    Second, I most certainly agree with the first sentence of your concluding paragraph. Power is key in having a proper competitve market - and by that extension the current health insurance market is far from competitive. But I don't see how making it more competitive is not possible. I have outlined a number of steps in this direction in an earlier discussion ( One additional distinction that needs to be made here is that of healthcare and health insurance - both of which are separate markets and separate products. Unfortantely, these two concepts, as well, have been largely conflated. Remember healthcare is about one's health, health insurance is about finance. I do agree that there are large systemic problems in both markets, but I see no innate reason why they cannot be competitve.

  10. But I think your allusion to issues of power raises an important point. I think it is true that neither government nor corporations have the individual’s interest at heart. This fundamental concept - that no entity will operate except out of self-interest broadly defined - is harnessed by capitalist systems, while is oppressed or squashed (never successfully) by planning systems.

    Not only does a planned system effectively mean that the ideal "right" way (if such a concept exists) to do something will not be the system put into place (what is the probability that the right idea will manage to work its way into law?), but it irrefutably means that the system in place necessarily will NOT meet the needs of the people. Sure certain people – the cronies of the power elite – will receive benefits. But the average person will have his liberty taken from him in order to ensure that the one-size fits all plan is what he will utilize.

    In this sense – in a parallel to the economic power monopolies and governments exercise – the government must coalesce and wield an enormous power to maintain a planned system. This is not simply a power of administration, but one of coercion to prevent individuals from choosing paths which appeal to their own values. In short, planning necessarily leads to tyranny and a destruction of the individual. Hayek outlines this very carefully in The Road to Serfdom (which I recommend). He writes:

    “…[M]any liberal socialists [aka planners] are guided in their endeavors by the tragic illusion that by depriving private individuals of the power they possess in an individualist system [read: health insurers], and by transferring this power to society [read: government run healthcare], they can thereby extinguish power.
    What all those who argue in this manner overlook is that, by concentrating power so that it can be used in the service of a single plan, it is not merely transferred but infinitely heightened; that, by uniting in the hands of some single body power formerly exercised independently by many, an amount of power is created infinitely greater than any that exist before…”

    This debate is not really one over healthcare, but one over socialism versus capitalism/liberalism. [And for the record I am speaking in terms strictly pertaining to two socio-economic political systems, not in any sense related to what pundits, talking-heads, politicians, or parties believe. I think this conversation is well past the point of caring about what the Democrats or GOP say, think, feel, did or did not do; but rather a conversation about theories.] Socialism, although I believe its founders were noble in aim, necessarily leads to oppression and eventually totalitarianism (except in instances of small, willing, likeminded individuals such as the Israeli kibbutzim). In its attempt to impress on every individual a concurring perspective, it necessarily ignores the essentially composition of human nature – in particular that man cannot act but in his own self-interest (which is another quite interesting discussion unto itself).


  11. The answer is term limits.

  12. As a european citizen, I'd like to point out that social libertarian capitalism exists over here, and the U.S. just made a step in the same direction. It hurts your patriotic feelings? I am so sorry for you!

    I would be more concerned about the anesthesized erosion of the GOP than that of the USA!

    Hopefully, battered egos will recover, realize the benefits for the nation (like ramping up the US health care system worldwide 37th rank) , and move forward ;-)

    One thing for sure: the US is a much more pleasant place to live in now than just a few years ago, maybe except for the wealthiest...


  13. Stephan~

    Well, its not about patriotic feeling - simply about whether the model is good or bad. However, I do not hope for a future that looks like Europe's present.

    And that isn't to say that there are severe problems with healthcare - but how they are fixed is important.

    I would like to ask you, however, what "social libertarian capitalism" is. It appears to be a complete contradiction of terms.

    Thanks for reading.


  14. It takes either a willful misreading of history
    or a glenbeckian mind to refer to this healthcare bill as socialist. Healthcare, except for the VA, still remains in private hands.

    The government has a role to protect the public from an unfair concentration of power. Would you argue that there should be no laws concerning monopolies?

    The statement that neither government or corporations have the individuals interests at heart is somewhat misleading. Research has clearly shown that behavior is heavily motivated by consequences, especially if the consequences are certain. If you get a bonus for reducing costs, that's what you'll do.
    Often, in health care the result is denying coverage unfairly.

    By most objective measures our healthcare system is vastly inferior to Canada's and Western Europe. Our children area sicker and our life expectancy is lower, yet we spend a much higher percentage on health care.

    My brother is Canadian, and though he would like to live half the year in the US, for the climate, he is afraid to lose his health coverage in Canada.

  15. From my understanding (and I don't watch him), Glenn Beck uses the term 'socialism' in an emotional fashion to incite his viewers and allude to doomsday fears ala the Cold War. On ANR I try to use it in the strictly political philosophy sense - namely that of a social and economic system. Socialism is rooted in the concept of the community and generally favors an equality of results rather than equality under the law. Policies, such as Food Stamps, Medicare/Medicaid, monetary redistribution and the like are all socialist in origin. That isn't to necessarily say that I do not support them, but simply that it is important to understand the philosophical underpinnings of policy and concurrently the assumptions and ramifications of such beliefs. In practice, socialist policies generally require a coercive force (the government) to limit choices (liberty) and force certain individuals to take specific actions in the interest of the public and/or other individuals. The individual mandate is a prime example of such policies in the current healthcare bill. This isn't to say that the current bill is 'as socialist as it can get' but it still is rooted in a socialistic world view, which is especially clear given by the insistence by many supporters that it is a step in the direction of single-payer. I think the problem with socialism, socialist policies (see Europe for a more open acceptance of socialism, particularly in the Social Democrat movement), is in its utopianism. Leaders, whether avowed socialists or not, that buy into the philosophy I believe are often noble and honest in aim but run into a lot of problems when putting the model into implementation. But I think it is clear that the underlying motivation of the recently passed bill is one of focus on the society and not on the individual - and that is socialist philosophy.

    As to your second point, you are absolutely correct that government involvement and rules preventing monopoly (and oligopoly) are proper, necessary and just. The distortions to the free market that come from monopoly in the private sector are nearly as bad as those that come from the government (scale is one of the main reasons for difference between the two). Any concentration of power is detrimental and should thus be limited. I refer you to a prior post on ANR [].

    I'm not sure why you think that statement is misleading. Your premise that individuals will respond only to incentives that influence them personally appears to be correct. I see no other way to motivate any individual to act other than through something that appeals to his self-interest. I think this concept is readily accepted regarding the private sector, but often overlooked with regards to government. Now certainly this may lead, as you correctly point out, to certain instances where the outcome is not correct according to some perspectives. But it is rarely true that the outcome will not be correct according to EVERYONE's perspective. This alone implies that if the government is to decide what is and what is not correct someone will have to pay the cost and lose his liberty. Many times, changing the structure of the incentives can lead to better outcomes for those that are unhappy. For instance look at the addition of seat-belts in the car industry and the recent pro-environmental movement. Consumer demand forced companies to provide aspects of the product that were previously un-economical for the producer.

  16. As to your final two points, do not think that I am trying to defend our current system. I am not. There are severe problems with it that need to be reformed. Many of these stem from excessive government involvement (tort issues, inability to buy insurance across state lines, tax exemptions for employer-based insurance, etc.) The problem is that the newly passed bill doesn't fix these problems, but moves in the wrong direction.

    This is precisely why many, including possibly your brother, are uncomfortable with leaving a secure (albeit not perfectly efficient) system for one that has less security b/c of the ties to employment. Employer provision of healthcare likewise has severe implications for the job market, reducing labor mobility and thus raising the costs and limiting entrepreneurship. Furthermore, it is always difficult to move from one economic system to another (see post-cold war Eastern Europe).

    Needless to say, none of this implies that our current system does not need real reform, not a continuation of consolidation of economic power.

    Thanks for commenting.


  17. How do you measure best healthcare in the world? Is it by what quality of healthcare you can get if you are wealthy? Or is it How does the US measure up to other western nations in health?

    If we have the most highly rankeed universities but our children's math scores are well below other Western countries, does that mean our educational system is the best in the world?
    I think not

  18. Josh,
    I just read your previous comments.
    They seem more theoretical and less supported by real world statistics.
    I believe that the best situation would be one in which people have the freedom to innovate but are also held directly responsible for their actions and that consequences occur naturally.

    In the Savings and Loan scandal that would mean that you must have a financial stake in your bank, so that your goals and your depositors goals are aligned. Otherwise you are rewarded for taking undue risks. If they succeed you make a bundle, if they fail you don't lose anything.
    This will be my last post for sometime. I've got work to do and this is becomming a time suck
    Paul Drexler

  19. Paul~

    I think the question is very good. I don't think there is a clear cut way to measure 'best'. 'Best' will most likely differ for different people. But isn't this precisely the problem with any 'one-size fits all' healthcare plan? It defines best for the country and limits individuals' choices to define best for themselves.

    As to your second post, you are correct that this is somewhat theoretical. I do believe that one should define and understand theories in order to develop good policy. It helps to give clear insight to why or how one policy will work or fail. Real world statistics can often be manipulated and do little to tell one how the future will pan out if the exact scenario does not repeat itself.

    Thanks for posting and good luck with your work.


  20. I'm heartened by the level of the discourse here. Nonetheless, I think that casting the debate over health care reform or any of several other current U.S. policy questions in terms of a fundamental dualistic contest of socialism vs. capitalism is intellectually dishonest.

    The pursuit of ideological purity does not lead to optimum solutions. The premise that one must either fundamentally embrace a path of unfettered free markets, or a path of total government coercion and a planned state, is a false dilemma. After the experience of the 20th century there is really no respectable movement, particularly in major-party American electoral politics, that advocates for a socialist economy with government control of the means of production. Calling the recent health care reform legislation "socialist" is pure hyperbole. Similarly, pure faith in the self-monitoring ability of an unregulated free market ignores too much of our history.

    The idea that any proposal that suggests adjusting policy toward the left is "rooted in a socialistic world view" is an example of the slippery-slope fallacy.

    There is a third perspective that this rhetoric ignores: that the optimum lies between the two extremes. For all the sturm und drang, the Western world has achieved a pretty stable consensus that the optimum economic system is one that balances the productive and efficient forces of a free market with reasonable (and democratically accountable) government regulation, collective funding of key infrastructure, and provision of a social safety net. Mainstream politics is really about making minor adjustments to this balance. Different countries have found slightly different points of balance, but all developed countries have gravitated toward the middle ground. The idea that an adjustment leftward will be closer to the optimum does not mean that the proponents advocate for a socialist endpoint, or are driven by underlying fealty to socialist beliefs.

    I hope that after the current national flame war subsides, we can return to our American tradition of pragmatic compromise and leave the current unhelpful trend toward Manichean arguments behind. Thanks for the great discussion.

  21. George,

    First, I am glad to see you enjoying the discussion. More than even convincing anyone of my particular beliefs, I think the importance of discussion is key. It is the only way for any ideas to grow and develop and is unfortunately too often missed.

    I do however disagree that the movement is not socialist in nature. This isn't to say it is the epitome of socialism - it is not. There could certainly be more socialist models (a single-payer for instance). What underpins socialism is that one group has arbitrarily decided a course of action for everyone, and has thus used coercive force to enact the agenda.

    I do agree with your ultimate conclusion; however, and I hope I never indicated anything to the contrary. I am not in favor of laissez-faire economices. There may need to be a distinction in terms (one I have not made myself) between "free-market" and "competitive market". The government does have a role to play in setting the borders and boundaries of a competitive system - without such controls (like a referee in a football game) the market would be subject to the abuse of the powerful. This would equally violate the princples which are important to a functioning competitive system.

    The underlying comparision is not between socialism and free-market/laissez faire system, but between liberty and consolidated power. Consolidated power leads to distortions and coercion. With the government, it strips the individual of his liberty. Capitalism (or competitive markets) are what is, if pernicious powers to distort the market are controlled. Socialism is what a few desire to build, if they are able to seize control of power.

    Thanks for reading.



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