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It’s the Entitlements, Stupid

August 7th, 2011 · 7 Comments · Economics

It’s pretty clear that the primary job of the government is now to distribute treats. As members of both parties know, it’s a great way to get votes. Sure beats building infrastructure and protecting property rights. Hard to believe after seeing this that some people are trying to call what ails us a “revenue problem.” Source here.

“When the people find that they can vote themselves money, that will herald the end of the republic. Sell not liberty to purchase power.”
– Benjamin Franklin


Oh, and this just in from Mankiw’s blog — Federal Nondefense Spending (% of GDP):



7 responses so far ↓

  • 1 Steve Roth // Aug 8, 2011 at 10:14 am

    So you’re pointing out the obvious: government has taken over a lot of the insurance function (income security, health) that was previously managed (inefficiently, and also inequitably) by the private insurance industry.

    (NHE web data (pdf), Table 13.

    The “entitlements” bogeyman comes down to one thing: HEALTH CARE COSTS.

    Whether the payments funnel through government or through private insurance is immaterial except as it effects costs (and on the equity side, distribution).

    And don’t try any zero-sum arguments. We all agree that effective economic policy can be win/win.

    Our current private health insurance system, which the ‘pubs have fought tooth and nail to retain unchanged (except by enriching the pharmas at immense taxpayer expense), doesn’t seem to be providing that win:

    Oh and yeah: it’s “obviously” a spending problem:

    Revenues have nothing to do with it:

    The S&P analysts, btw (for whatever they’re worth) agree with me: no nationalized health care, no AAA rating.

    There’s your bond vigilantes talking…

  • 2 Steve Roth // Aug 8, 2011 at 10:44 am

    Oh here’s the other one I was going to send but was broken. Seems to be fixed.

  • 3 Steve Broback // Aug 8, 2011 at 11:19 pm

    I’m lost. I think I am missing something. My interpretation of the chart and your post is that the way to save the government from a crushing health care burden is to introduce a massive new health care entitlement?

  • 4 Steve Roth // Aug 9, 2011 at 1:17 pm

    > the way to save the government from a crushing health care burden is to introduce a massive new health care entitlement?

    Wow you really are missing something.

    1. Fact: Health care costs are rising faster than inflation. Whether future payments for those costs go through government or through private insurance is arithmetically immaterial. In either case they have to be paid for out of private income: higher taxes or higher premiums, either way. Equally “unsustainable.”

    2. So: what economic system will result in those costs being lower/growing more slowly in the future?

    3. Obviously not the private-insurance status quo. We have a wee bit of history to demonstrate that.

    4. The best examples we have of effective, sustainable systems in modern prosperous countries are, without exception, nationalized health care.

    I’ve asked you before and I ask you again (I really don’t know the answer): has anyone tried Ryan-style vouchers? How has it worked out?

    I’m looking for real-world solutions with demonstrated track records of success, not faith-based utopian notions. I’ve got one. You got any?

  • 5 Steve Roth // Aug 9, 2011 at 1:24 pm

    P.S. You realize that health care reform causes tens of millions of free-riders to start paying their share of premiums, right?

  • 6 Steve Roth // Aug 9, 2011 at 2:22 pm

  • 7 Steve Broback // Aug 12, 2011 at 12:26 am

    Arithmetically immaterial is correct. It’s significantly algebra, geometry and calculus. Try to think like an economist. Insurance increases demand which causes the demand curve to shift out, which makes prices go up. Rainbows, unicorns, and dreams of social justice can’t change that. Arithmetic it ‘aint.

    Besides, we are talking about GOVERNMENT solvency and expenditures here, not NATIONAL expenditures. You’re confusing them. It’s the Feds who borrow 40 cents of every dollar spent, not the populace at large.

    It’s true, autocracies can be very efficient at times. The “efficient” canard is a basic fail. Savings due to reductions in service thanks to price controls may be “efficient”, but the same can be said of automobile usage in Cuba. Keeping those 1950’s cars up and running is a lot cheaper than buying a new car every seven years. Outcomes matter. Speaking of:

    3 months wait for an MRI? Really? SO efficient!

    Who could have predicted that a demand side solution would result in rationing? What a surprise! I can get *surgery* for my dog in 1/10th the time. Same with Lasik for a human. Why? NO PRICE CONTROLS.


    It’s utopian to not have Obamacare? Not having it for 250 years “didn’t prevent” etc. etc.

    Lifetime cap on benefits is utopian?

    High-deductibles are utopian? Here’s true “cost curve” bending that produces “significant (even substantial) savings without adversely affecting member health status.”

    What’s utopian is the belief that mandating low prices/reimbursement waits won’t reduce the supply of services and equipment. Maybe the advocates don’t actually hold that belief. Maybe the self-congratulatory ego boost from their externally interpreted benevolence is worth the additional deaths. (Yes I know you can conjure up data that implies that’s not true — I can do the same for the opposite case) it doesn;t matter. The data may be right, but the interpretation is wrong. You don’t shift demand out and supply back without killing people. But hey, those victims are largely in the middle class, at least some poor people got services they wouldn’t have received otherwise. Sometimes you have to sacrifice utilitarianism for the sake of redistribution.

    What’s truly utopian is mandating a massive new government entitlement program when we can’t pay for the ones the benevolent Dems “gave” us in 30’s and the 60’s. (Mea Culpa — George Bush in 2003 too…) Time to get real. The fantasy of us converting to the Nordic model died on November 2, 2010. Health care overreach and the resulting backlash guaranteed that we’ll need to wait at least a generation or two before the people will allow themselves to be taxed to a level where all those glorious programs from our romanticized leaders can be implemented.

    Have no idea about vouchers, but the logic seems sound. Food stamps as an idea seems a lot better than “food insurance”.

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