Winners and Losers

Referring to President Bush’s latest socialist scheme, Kate Baicker, a member of the White House Council of Economic Advisers, said, "There are always going to be some winners and some losers . . . ."

As if anticipating this comment 58 years ago, Ludwig von Mises wrote in Human Action: "The statement that one man’s boon is the other man’s damage is valid with regard to robbery, war, and booty. The robber’s plunder is the damage of the despoiled victim. But war and commerce are two different things."

In short, if the president’s latest attempt further to socialize the already heavily socialized health insurance industry, as characterized by Baicker, really does result in "some winners and some losers," it must be, according to Mises, either "robbery, war, [or] booty." To one degree or another, it is all three. It robs some citizens to provide booty for others, with the tax-eaters making war on the taxpayers.

It is also the final nail in the coffin of anyone’s characterization of Bush as a conservative, for with this proposal Bush is officially asking for a tax increase on "about 30 million Americans," according to Baicker. Given that government estimates are usually quite far off the mark and that the administration is naturally going to try to make the policy appear to harm as few people as possible, it’s probably safe to say that far more than 30 million Americans are going to see a tax hike out of this.

Now the Democrats will argue about the specifics of the plan and complain that the plan doesn’t go far enough toward Castro-style socialized medicine – never mind this recent example of how well that system works – but the fact is that they, as well as most of their cohorts on the other side of the aisle, must be overjoyed that a Republican president who has expended much effort burnishing his reputation as a tax-cutter is now proposing to end the decades-old exemption of employer-paid health insurance from income taxation. Finally they can get their hands on all that money that has eluded their grasp for all these years!

The administration will counter that, in fact, "more than 100 million Americans" will end up saving money under Bush’s plan, but that is a matter that time can correct. Under Bush’s plan families get a tax deduction for up to $15,000 worth of health insurance premiums (individuals get only $7,500), with any overage being taxable. The Reuters article linked above notes that "[a]verage family coverage offered by employers costs about $11,500 annually." Thus, without even changing the tax code again, the feds can ensure themselves a steady stream of increasing revenue: with health care costs continuing to climb precipitously, the average will easily reach $15,000 in a few years. Throw in a few reductions in the deduction and you easily have a tax increase on most, if not all, Americans in no time flat.

The essence of the plan is more fascistic than out-and-out socialistic: taxation combined with faux federalism and increased subsidization and regulation of private insurance companies (to avoid the appearance of having a single-payer health care system). The IRS will rob taxpayers of their hard-earned money if they or their employers dare to spend more than the government’s approved amount on annual health insurance premiums. Then the feds will kindly turn around and supply some of that money – probably very little once administrative costs are taken out – to the states so that the state governments can tighten their grip on the health-care industry by "arrang[ing] for uninsured residents to get coverage," as Reuters describes it, adding that "states could subsidize health insurance premiums directly, they could establish high-risk pools for the sickest people, and could help individuals and small businesses create their own insurance pools."

The whole plan is perverse. Employees with generous employers will now be penalized, either by paying higher taxes or by having their benefits cut so as to avoid those taxes, while the ranks of those on the government health insurance dole in one fashion or another will increase, causing upward pressure on health care costs. This will, in turn, cause health insurance premiums to rise, pushing ever more people over the government’s arbitrary limit, increasing the amount of income subject to confiscation by Washington. Then come further interventions to "fix" that problem, and before you know it, we’re off to Havana General Hospital.

Furthermore, even from a utilitarian standpoint the plan doesn’t make sense. According to the Reuters article, "[t]here are about 47 million people with no insurance in a country of 300 million. Baicker said Bush’s tax proposal would result in ‘upwards of 3 million or more [sic] newly insured people.’" Meanwhile, taxes are going to increase on at least 30 million people. Thus, in order to insure an additional 1 percent of the population – and a mere 6 percent of the uninsured, for that matter – the government is going to hike taxes on 10 percent of the population.

Ah, but there is an escape clause, says the administration. No one has to pay the higher taxes – to be a "loser," in Baicker’s words. Anyone who just shuts up and does as he’s told can avoid them. "Baicker," reports Reuters, "said about 30 million Americans could face higher taxes under the president’s plan ‘if they didn’t change their behavior’ – meaning giving up an employer’s more generous health plan in favor of a less-costly one." There you have it, straight from the horse’s mouth: it’s all about government control of your behavior. Do as you’re told, and no untoward consequences will befall you; do otherwise, and we’re coming for your bank account. Can they make it any plainer than that?

In the great game of politics, there are always winners and losers because government does not produce anything. It can only rob Peter to pay Paul. From a purely political standpoint, then, Baicker was correct in that assertion.

Meanwhile, unlike the "robbery, war, and booty" of politics, every day billions of people interact peacefully in the marketplace, with each party to an exchange coming out a winner because he has exchanged something he valued less for something he valued more. As Mises put it, again in Human Action, "The market economy involves peaceful cooperation. It bursts asunder when the citizens turn into warriors and, instead of exchanging commodities and services, fight one another." That is, of course, precisely what happens with government programs, where one group of citizens fights with another to see which group can steal more from the other.

Instead of increasing the government’s role in health care, whether via Democrats’ up-front socialism or Republicans’ backdoor variety, it’s time we abandoned the road to serfdom and embraced a genuinely free market for medicine. Otherwise we’ll all end up losers. Just ask Fidel.

January 24, 2007

Michael Tennant [send him mail] is a software developer in Pittsburgh, Pennsylvania.

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