[ExI] Government footprint and socialized medicine/was Re: The Circle of Coercion

[dan_ust at yahoo.com]

--- On Tue, 5/12/09, Damien Sullivan <phoenix at ugcs.caltech.edu> wrote:
> -0700, Dan wrote:
>> --- On Mon, 5/11/09, Stathis Papaioannou <stathisp at gmail.com>
>> wrote:
>>> 2009/5/11 Lee Corbin <lcorbin at rawbw.com>:
> 
>>>> would be questioned? Who sixty or seventy
>>>> years ago in America could have guessed that
>>>> government would come to absorb about fifty
>>>> percent of everyone's pay, and would soon
> 
> Man, what?  Tax rates right now are lower than they've
> been in
> generations.  We're still in the Bush tax cuts for the
> upper class --
> 35% on the tap bracket -- and Obama's cut them for the
> middle and lower
> class.  The 30 year postwar economic boom had top
> taxes of 70%; Reagan
> in 1981 cut that bracket *down* to 50%.  Yet now we
> have tha taxophobes
> talking as if 39% vs. 35% is "socialism".  Lowest tax
> rates in decades
> and the GOP still talks only about tax cuts.

I agree that income tax levels are lower and don't understand Lee's comments.  I also think that other taxes have risen and that inflation has a huge impact on this.  IIRC, too, the federal income tax was sold (it came into effect in 1913, IIRC) as an alternative to high tariffs and the [income] tax supposedly only really impacted the wealthy.

There's also the problem of measuring the government's "footprint" in society.  I wouldn't speak of a certain percentage of taxation as socialism, though I'd say that, even during the era of the Reagan tax cuts, government's footprint grew.*  (And the GOP has proven itself, time and again, to be faithful to the creed of "spend spend spend.")  This is where I think spending might be a better proxy and it might be better to measure spending in absolute terms rather than relative terms -- in other words, in inflation adjusted money terms rather than as a percentage of GDP.  (On the latter, aside from GDP being mostly a meaningless measure, were it to double and, say, military spending doubled and inflation were zero, this would likely mean, even though the military spending remained the same percentage-wise, the military footprint grew -- say, maybe there were more tanks, bombs, and more places being invaded.**)

>>> You keep going on about health care, but it is
>>> one of the
>>> things that clearly works better when there is
>>> government involvement.
>> 
>> I disagree, but what's your evidence for this? 
>> From my readings, it
>> seems to me that government involvement has made
>> healthcare much more
> 
> Well, there are lots of countries with socialized insurance
> (in one
> case, actual socialized medicine), and they all live longer
> at less cost than the US.

Are you certain this is evidence of "health care" that "clearly works better when there is government involvement"?  If so, then you have the US case, which is one where regulation is probably more rampant than anywhere else and this leads to higher costs and lower quality of service (despite the higher costs).  This regulation includes the FDA, which increases the overall costs of new therapies and even keeps some therapies off the market (even ones that are approved in other advanced countries); the AMA, which reduces competition in that market overall by limiting seats at medical schools and eliminating (or damn near eliminating) any competing forms of medicine; and myriad regulatory oversights that seem bent on strangling efficiency out of the system.  The surprising thing to me is actually that the US system isn't far worse.
 
> Also, market health care manifestly fails to provide health
> care who don't have money. 

Not so.  There would, under a voluntary health care system be room for charity.  There seems to be some evidence that in the US this was the main way the poor got healthcare before the Medicaid program was created.  (I'll have to look up references, but I recall charts seeing inflation adjusted costs rising soonafter 1965.  Coincidence?)

> Or who don't have proof of payment,
> as might happen
> if someone got mugged and left unconscious.  The US
> decided some time
> ago that people shouldn't die for lack of money, thus
> Medicaid and more
> fundamentally, the ER mandate to take people in.  We
> already have
> socialized insurance of sorts, of an egregiously bad
> variety.  (One that
> dumps the costs on hospitals, and doesn't provide for
> preventive care,
> and provides incentives not have ERs; top-notch insurance
> won't save you
> if you bleed out before you reach an emergency room.)

I disagree.  This was the rhetoric for the program -- not the reality.  And the actual result, if one looks at the data, was to drive up costs, making it ever harder for people to afford health care -- and feeding into the call for more regulation and more subsidization.  (Eventually, this lead, about ten years after Medicaid went into effect, to attempts to regulate pricing.  Why was this?  Why the uptick, above inflation, in price?)  This makes sense from an economics standpoint: anything that stimulates demand, all else being equal, will likely cause a rise in prices.

>> partly -- what might've happened had healthcare reform
>> been in the direction of a free market (as in, in the
>> US, abolishing the FDA, getting rid of the AMA's
>> monopoly powers, and removing government completely
>> from provisioning and mandating healthcare).
> 
> We had that back in the 19th and early 20th century. 
> We moved away from it.  Ever wonder why?

Actually, the AMA starting up in the mid-19th century and consolidated its control over the US markets by the end of that century.  The real motivation, as opposed to the offered rationale, for the AMA and the FDA seems to have been to keep out competitors.

>> those apologists are completely, unequivocally
>> wrong.  Central
>> economic planning failed (and continues to fail; in
>> the US, e.g., the
>> central bank is central economic planning for the
>> money system and the
>> recent bust is merely its latest flop) as can be seen
>> by how poorly it
> 
> Bad call; there's good arguments that the latest flop is
> from deliberate
> lack of planning -- specifically, regulation.

While there is some evidence that removal or changing of certain regulations (specific ones addressed in Commodity Futures Modernization Act of 2000) help cause the problem, this is not completely true.  This was an era of the Sarbanes-Oxley Act and the SEC clamping down on insider trading.  Anyone working for a publicly traded company of a decent size probably has noticed the legion of accountants that suddenly appeared to comply with the former and has had to sign documents regarding the latter.  There's always this myth with every economic crisis that up until the crisis happened government didn't exist, that we were all living under market anarchism, and had we only had the sense to put ever wise central bankers and bank regulators in charge, this wouldn't have happened.

It also seems to be the case that the main cause of the current crisis was the inflation during the Bush years -- and that this was acerbated by heavy government involvement in the housing sector (especially via the government-sponsored Freddie Mac and Fannie Mae, but also via the CRA and the "ownership society" claptrap) and the expectation by bug financial market players that bailouts were always an option.  (The last has been the underlying expectation at least since the early 1990s -- and even earlier given Greenspan's penchant for always helping big banks whenever a crisis was in the offing.  This created, I believe, a financial culture of high risk -- one that continues -- coupled with government subsidy -- the worst of both worlds, especially if regulations are loosened.)

> Ideological sabotage, not basic impossibility.

I disagree.  The view you offer below is basically that regulators can foresee crises and otuguess markets.  History and theory seem to show this is not possible -- and, if they could do so, then, I submit, full blown planning on the Soviet model should work abd perform at least as well as markets.

> We know how to regualte banking
> so that it is safe
> and boring and stable, but we've had a regime that
> disdained that in
> favor of "innovations" like CDOs and hedge funds. 
> Voila.  Conversely,
> we had unplanned banking in the 19th century; that
> generated major and frequent panics.

This is another myth, IMO.  Major 19th century crises, like the 1819***, 1837, and 1873 panics in the US were due not to "unplanned banking" but inflationary policies fostered by the government and other government meddling in banking and money.  Also, even during the so called "free banking" period in the US (roughly from 1837 until 1860), there was state intervention in most so called "free banks," particularly with state government mandating portfolio requirements, limiting branch banking, and requiring banks to hold state debt.

In essence, too, we have had a central planner in banking in the US since 1913: the Fed.  In recent decades, too, the Fed chair has planned as much as within his power the financial markets -- almost always failing to see crises and probably, if Austrian Business Cycle Theory is correct, causing many of them.  (This alone should be proof that having a central planner dictate interest rates, money supply, and the like doesn't work.****)

>> **  Not to mention, Mises showed theoretically
>> why this was so and
>> predicted its failure early on.  He even took
>> Lenin's New Economic
>> Policy as evidence for his view being correct -- and
>> others have seen
>> it as an open admission that central economic planning
>> can't work.
> 
> Which is why the US is defended by lowest-bidder
> mercenaries.

The US is not defended: those contractors in Iraq and Afghanistan are by a predatory government (the US federal government) for occupation -- an offensive role, no?

Also, do you agree that Lenin's NEP is evidence that Mises was right about central planning?

Regards,

Dan

*  I mentioned this earlier, there are three basic ways modern governments are funded: taxation, borrowing, and inflation.  Taxation is typically the least popular because it's readily apparent who's being taxed -- and the taxed often can and will organize against it.  Borrowing and inflation tend to be preferred  because it's much harder to discern who will ultimately pay, making it much less likely the payers will organize and resist.  (Borrowing is like an indirect tax because, eventually, the loans will have to be repaid, so that will have to come from future taxes or future inflation.  Also, government borrowing -- since it tends to be very large and concentrated -- does compete with private borrowing, so it tends to drive up market interest rates and decrease the supply of loanable funds.  This is usually a more immediate effect than repayment of the loans.  Inflation is also like an indirect tax because holders of inflated money lose some
 value of that money.  However, there are time lags and path dependencies, so, again, it's very hard to tell who will ultimately pay the price -- save for generalizations like those only fixed incomes and net creditors will be harmed while those who receive the inflated money first (usually the government, the big banks, the large debtors) will benefit the most.)

**  The argument offered by some neo-cons (who pretend to be libertarians) that double the economy means you need double the military is faulty for two reasons.  One, the military is unnecessary anyway, especially since its role is offensive and harms the economy.  Two, the one non-libertarians might give more weight to, there is no direct connect between the size of an economy and the percentage that must be spent on supposedly legitimate military needs.  If my worldly wealth were to double, I doubt I'd need to spend twice as much on my personal security.

***  See Rothbard's _The Panic of 1819_ for a detailed, if rather boring, examination of this crisis, its causes and aftermath.

****  Like with Soviet central planners, the Fed chair and the Fed board are not omnipotent and omniscient.  Heck, recall just before the full extent of the crisis was evident and months before Fannie Mae and Freddie Mac were bailed out, Ben Bernanke said the two mortgage lenders were in "no danger of failing." :@  And yet he still has his job.  We live in strange times...