Healthcare and Economic Realities

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Recently
by Ron Paul: Healthcare
Reform Passes

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With
passage of last week’s bill, the American people are now the
unhappy recipients of Washington’s disastrous prescription
for healthcare “reform.” Congressional leaders relied
on highly dubious budget predictions, faulty market assumptions,
and outright fantasy to convince a slim majority that this major
expansion of government somehow will reduce federal spending. This
legislation is just the next step towards universal, single-payer
healthcare, which many see as a human right. Of course, this “right”
must be produced by the labor of other people, meaning theft and
coercion by government is necessary to produce and distribute it.

Those who understand
Austrian economic theory know that this new model of healthcare
will cause major problems down the road, as it has in every nation
that ignores economic realities. The more government involves itself
in medicine, the worse healthcare will get: quality of care will
diminish as the system struggles to contain rising costs, while
shortages and long waiting times for treatment will become more
and more commonplace.

Consider what
would happen if car insurance worked the way health insurance does.
What if it was determined that gasoline was a right, and should
be covered by your car insurance policy? Perhaps every gas station
would have to hire a small army of bureaucrats to file reimbursement
claims to insurance companies for every tank of gas sold! What would
that kind of system do to the costs of running a gas station? How
would that affect the prices of both gasoline and car insurance?
Yet this is exactly the type of system Congress is now expanding
in health insurance. In a free market system, health insurance would
serve as true insurance against serious injuries or illness, not
as a convoluted system of third-party payments for routine doctor
visits and every minor illness.

While proponents
of this reform continue to defy all logic and reason by claiming
it will save money, I worry about cataclysmic economic events. Already
investors are more reluctant to buy US Treasuries, fearing that
the healthcare bill, along with other spending, will cause government
debt to explode to default levels. I had the opportunity last week
to address my concerns with both Treasury Secretary Timothy Geithner
and Federal Reserve Chairman Ben Bernanke, especially about the
potential for the coming serious inflation. I am not optimistic
that these important decision makers truly understand what is coming,
why it is coming, and how best to deal with it.

The Federal
Reserve finds itself in an unprecedented and unenviable position.
To keep up with government spending and corporate irresponsibility,
it has increased the monetary base by nearly $1.5 trillion since
September of 2008. Excess bank reserves remain at historically high
levels, and the Fed’s balance sheet has ballooned to over $2 trillion.
If the Fed pulls this excess liquidity out of the system, it risks
collapsing banks that rely on the newly created money. However,
if the Fed fails to pull this excess liquidity out of the system
we risk tipping into hyperinflation. This is where central banking
inevitably has led us.

The idea that
a handful of brilliant minds can somehow steer an economy is fatal
to economic growth and stability. The Soviet Union’s economy failed
because of its central economic planning, and the U.S. economy will
suffer the same fate if we continue down the path toward more centralized
control. We need to bring back sound money and free markets — yes,
even in healthcare — if we hope to soften the economic blows coming
our way.

See
the Ron Paul File

April
1, 2010

Dr. Ron
Paul is a Republican member of Congress from Texas.

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