Monday, August 24, 2009

When did Conservatives become as dogmatic as Socialists?

My problem with the conservative position on health care reform is that it's all based off a misnomer - the automatic, dogmatic assumption that the unfettered free market is best for everybody.

That's simply not true - as recent history has uncompromisingly taught us.

Look at the housing market. Democrats like Barney Franks fought tooth and nail against regulation (which the Bush administration proposed, time and again) and, as a result, the market blew up into a bubble...

...and collapsed.

By this time next year, half of American mortgages will be 'underwater' - with borrowers owing more than their house will ever realistically be worth again.

[Wait - didn't Militant Ginger blame the collapse of the housing market on too much government interference before? Read this post and see if he's contradicting himself. Editorial Bear]

Unregulated, the free market is a permanent cycle of 'boom and bust,' which is is simply not an acceptable model to adopt when dealing with something as essential as a nation's health care.

That's not to argue against private industry, capitalism or the free market playing the largest part in the health care. It just can't be the only part - because if it is, what happens when the 'free market' goes wrong?

Which is does, infrequently, but catastrophically.

Take Social Security, for example. During the election, conservatives often proposed 'privatizing' Social Security, by giving people the opportunity to pay up to 75% of their mandated payroll payments into private funds rather than the Social Security itself.

(In fact, I advocated the exact same thing in March 2008.)

It was a great idea, before 'the crash.' In 2007, 401k and private retirement accounts offered considerably bigger payouts than Social Security, which was (and continues to be) heading towards bankruptcy.

But last year's devastating economic collapse wiped out some people's private savings accounts and 401ks. Mine lost something like 94% at one point - which is terrifying considering that some people were forced to cash in their private retirement funds when they'd lost 50%/60% of their value.

Imagine if they didn't have the cushion of boring, bankrupt, dependable Social Security? Imagine if they'd taken their 75% of payroll payments and put them into those private retirement fund instead? Ask THEM whether the free market worked better than government-run Social Security, when they'd watched almost half of their life savings dissolve away before their eyes.

In this instance, the free market system didn't work better.

And that's the rub, really.

While I believe the emphasis on society should always be entrepreneurship and private enterprise, it's become increasingly apparent that the free market can't be relied upon to 'always be right' - and however bad the government 'solution' to the free market weakness might be, they've usually got enough taxpayer clout to make it work.

Regular contributor Tom, for example, recently used the example of 'cash for clunkers,' suggesting it was a failure:
"Take a look at cash for clunkers. The program is 200-300% over budget, because the government overestimated demand for its services...

...and it would be further over budget if it hadn't been shut down early. Payment for the dealers, which was promised to happen in 10 days, has been overdue for weeks, causing several dealers to drop out of the program.

Now, ask yourself... are these the people you want managing your health care?"

Are you kidding? By those standards, 'cash for clunkers' was a blistering success!

It actually got people into the showrooms - and buying cars. That's why it ran out of money so quickly, because it worked!

Certainly, there are criticisms of how slowly it paid out and how bureaucratic it was, but 'cash for clunkers' still boosted sales for GM and Ford in a way that - you guessed it - the free market couldn't.

The 'free market' had led to the virtual collapse of the American car industry, whereas the much-criticized ‘cash for clunkers’ boosted sales for the first time since 2007. That means it wasn’t a failure, judging by it's impact on the car industry..

The simple fact is that the unregulated free market GETS THINGS WRONG from time to time - and, in a mixed economy, the government's there to pick up the pieces.

Now, I'm not advocating a socialist state, or expanding the powers and influence of government until they reach the same level as, say, Britain or France. One of the reasons I love living in America is because it embraces the opportunities of the free market (as well as its risks.)

But I just don't know where the conservative's dogmatic insistence that the free market is always right comes from. It's not.

If the events of the last year have taught me anything, it's that our 'mixed' economy in America is something of a blessing - and that the conservatives who believe the 'free market' is entirely infallible are simply no better than the idiots who believe in socialism or communism.

"Moderation in all things," said Benjamin Franklin. "Including moderation."

7 comments:

Tom said...

I had a long post here, that was eaten by Firefox. I'll just put in the most important points.

The housing crisis was, in a large part, caused by government interference in the markets. The government created Fannie Mae and Freddy Mac to insure unworthy mortgages. This made lenders willing to lend to people who they otherwise wouldn't.

It was the failure of Fannie and Freddie that led to this crisis.

If the government budgets wrong for cash for clunkers, they can just end the program. If they budget wrong for healthcare, what then? With the possible exception of end-of-life consultations, it's hard to end healthcare early.

Capitalism works really well in practice, as a means of allocating resources. In a free market, if a business charges too much or skimps on service, they'll lose market share to a competitor. Unless they can fix their problems, they will have less money, and in the worse case, their business will go under--- replaced by the competitor.

When the government makes a mistake, the people involved get paid the same amount as if they were perfectly. Their jobs are rarely in jeopardy.

It's only the taxpayer that gets shafted.

There are some things that need government power: the military, law enforcement, contract enforcement, natural monopolies, and so on.

But when it comes to the government, less is usually more.

Roland Hulme said...

Hi Tom! Sorry about blogger eating your comment. I HATE when that happens.

You're right about Freddie and Frannie, although that was back in Clinton's day, wasn't it? Government mandated 'dangerous' mortgages to people who possibly couldn't afford them - although the free market followed suit, so they're not totally without responsibility - but you're right. I think I wrote about that months ago and totally contradicted myself here!

Anyway. What you wrote here:

"There are some things that need government power: the military, law enforcement, contract enforcement, natural monopolies, and so on."

I think the argument rests on whether health care is one of those things or not - and coming from Europe, I'm admittedly biased when I think they should (in moderation) be involved.

It's a weird thing for a European to come to a country where access to health care is not seen as an automatic right. It's one of those weird things that highlights the differences between our generally similar cultures.

Susanne said...

I'm not sure what the answer is re: health care, but as for capitalism, I believe it works.

Work hard + provide a needed service and watch your business succeed. Don't work hard or don't provide a needed service, then your business fails and you move on to something else or stay in the poor house.

The reason gov't officials often give bad performance is because their jobs are pretty much guaranteed (tenured) and they have no incentive to work harder or more efficiently (although some do out of decency).

Anyway...I think our society does well when people take responsibility for their own actions. When you run up debt and then expect someone to bail you out because you are the "victim" of your own consumerism...that just stinks. You are seeing the result of a nation that has fed its desires, not taken personal responsibility and plays the victim card.

And that, to me, is the reason our society is going downhill. People want to blame others and have others pay for their "mistakes" -- we are always the victims...blah, blah, blah.

Tom said...

There's no "right to health care" in the UK or the rest of Europe. There's just a difference in how we provision health care.

In the US, people can pick how much insurance they want. If you want more coverage, then pay for it. (A big problem with the cost of the US system is that government mandates make it hard to pick how much insurance you want.)

In the UK, you're stuck with a system where some government functionary decides if you get health care or not. If they say "no", you're pretty well boned.

I think food is a very good analogy. Nobody goes around claiming we have a "right to food", and food is certainly more essential than health insurance. (I went without needing healthcare for over 5 years. Try going for a week without eating.)

Sure, we have programs to help the poorest among us get food. But we also have programs (medicaid) to help the poorest among us get healthcare. But the rest of us are expected to be responsible and purchase our own food. By doing so, we get to pick from what the market offers to balance our wants and needs with what we can afford.

Roland Hulme said...

Tom - I like the food analogy, but I counter with this: Imagine there were only two grocery stores in your area and they both kept raising the cost of food, while making the packages smaller and smaller. How many of their customers would have to starve before they made the food affordable?

Susanne - It's the same deal. I think the problem with the current system is that there isn't enough competition and there aren't any alternatives, so the insurance companies can charge more and more, and cover less and less, until people simply can't afford to buy it.

A public option is, to me, a good way to deliver real competition - but I'd be open to alternatives. My problem is that the protesters (who are orchestrated by insurance company insiders) want to cull the public option, while keeping the mandatory purchasing, meaning that they'll have millions of Americans FORCED to by coverage, without any incentive to bring the costs down.

Tom said...

Imagine there were only two grocery stores in your area and they both kept raising the cost of food, while making the packages smaller and smaller. How many of their customers would have to starve before they made the food affordable?

Well, there's a couple of answers to this.

If they're conspiring to artificially raise prices, that's one thing. But competition handles that... if prices are too high, that's asking for a competitor to come in and lower them. As long as the government stays out of the fray, people will reward the competitor and stop patronizing the gougers, who will be forced to lower prices to keep up.

Government regulation is also a cause of high prices. Say the price is too high because the government requires you to buy a lump of caviar with every loaf of bread. The solution there is to reduce government regulation.

Finally, there's the case where the price is just high, and the stores are just passing that cost on to the consumer. There's not much that can be done about that.

What I wouldn't do would be to plop a government food dispensary down between the two stores. If there was a way the dispensary could save money, the stores (or their potential competitor, let's call it val-mart) would have done it already.

Now, that doesn't mean the government won't try to sell things below cost. The federal government might sell something for $1.00, only to find out it costs two or three times that. They can pass on that expense to the taxpayer, to keep up the illusion the dispensary is saving money.

But at the end of the day, it's just an illusion, and you're also losing the benefit of the free market trying to save money. This is why we don't have government food dispensaries.

Now, insurance is in some ways different, because it's a gamble. The ways to reduce insurance cost is to make it less of a gamble. This includes having bigger insurance pools, and allowing people to buy insurance across state lines. The latter works because states have different requirements as to what needs to be included in a patient's plan... IIRC, my plan is required, by law, to include caviar... err... acupuncture, something I consider to be hogwash.

The wrong answer, though, is to turn healthcare over to the government. When was the last time you saw a government program and though "wow, the taxpayer got a good deal out of that one."

Me, I'm still wondering why the government just spent billions turning perfectly good gingermobiles into junk.

ck said...

You're killing me man. Logic and reason... its your friend.

My problem is that the protesters (who are orchestrated by insurance company insiders) want to cull the public option, while keeping the mandatory purchasing, meaning that they'll have millions of Americans FORCED to by coverage, without any incentive to bring the costs down.

What?? Please tell me this was a momentary lapse in judgment. The folks protesting against this are by and large regular folks. Period. There is absolutely no evidence otherwise. I protested against Barack Obama at a local tea party. I'm not paid.

On the other side of the issue though, you have people that ARE getting paid to protest in favor. Logic and reason my man... logic and reason.