Thursday, April 01, 2010

"Repeal and Replace" - Filling In the Outline

"Repeal and Replace" - Filling In the Outline

C.K. MacLeod of Zombie Contentions posted a fascinating discussion of the larger context of the fight against ObamaCare; his point is that we cannot win the argument to repeal ObamaCare until and unless we are prepared to argue exactly what should replace it:

As on other issues historically identified with the left, a reflexive rejection of progressive premises tends to impair any simultaneous argument for alternative solutions. This contradiction underlies tension between "Reformlicans" and "Repealicans" that will likely worsen over time. Most of us realize that "Repeal + Reform" is a much larger coalition than Repeal or Reform separately, but concessions that seem obviously rational to some, as validating aspects of the just-passed bill initially seemed to Senator John Cornyn, may leave others nonplussed. Conversely, forms of direct opposition -- such as unstinting criticism of Stupak, support for constitutional challenges, disputing the concept of health care as a "right" -- carry some risk of re-casting Republicans as "enemies of health care." Even the persuasive argument that ObamaCare will overwhelm the system with new demand implies that millions of Americans are presently under-served on a matter of life and death, and calls into question the critic's commitment to their welfare.

Jonathan Tobin, writing at Commentary in his Contentions blog (and quoted by Zombie Contentions) argues that the fight is not merely to overturn ObamaCare, or even the other specific manifestations of Obamunism such as Cap and Tax, Card Check, and bank seizures; rather, we must attack the entire leftist "narrative," the overarching philosophy of thuggish domestic imperialism (my phrase) that has animated government takeovers of society since the days of Otto von Bismark, creator of the modern welfare state and arguably the first European-style social democrat, in contradistinction to Socialism, Marxism, and the much later Naziism.

As Tobin puts it:

The challenge for conservatives is more than merely pointing out ObamaCare's shortcomings, its enormous costs, and its impact on a huge American industry. The challenge is also more than demonstrating how the health care that ordinary Americans get -- and which the vast majority currently think is good -- will decline. Conservatives' real job is to attack the liberal narrative. What they must point out is that, rather than the next inevitable step toward greater justice, Obama's "reform" is, in fact, a move away from individual freedom and toward the same nanny welfare state that Americans thought they had put to rest. Rather than a progressive innovation, ObamaCare is a retrograde move that seeks to drag American politics and the economy back to the mistaken emphasis on government power of the mid-20th century. Like so much of the welfare economics and failed liberal policies of that era, ObamaCare has the potential to do far more harm than good. Policies that are driven merely by good intentions and a belief in expanding government power can help derail the engine of American wealth creation and freedom -- just as the devastating mistakes of "Great Society" liberalism did in the past.

The critique of these two gentlemen is vitally important; yet it tells us only the what and why, not the more important how: How do we craft a counter-narrative, an arc of fiscal liberty that resonates with the freedom-loving American people, yet clearly explains how sound government policy that encourages free-market thinking can nevertheless reduce the irreducible problems that many Americans see as inevitable under Capitalism.

I believe those "irreducible problems" are in reality category mistakes on the part of an electorate misschooled for decades by liberal educators; they believe that it's a failure on the part of Capitalism that some people go bankrupt, or lose their houses, or find themselves unable to pay for medical care after refusing to purchase medical insurance... whereas those are actually features, not bugs. Without the right to fail, there is no right to succeed; the nanny who protects you from your own stupid decisions also "protects" you from your own bold investment. Or as Dennis Prager puts it, "the bigger the government, the smaller the citizen."

But stated so starkly, that is not a winning argument, to say the least. Many people are frightened by the lack of a "safety net." So what are we to do?

Fortunately, Capitalism coupled with liberty is such a powerful engine of wealth creation that it can coexist with some degree of statism without harm; too much government control, however, will stifle creativity and innovation, causing the creation of wealth to sputter out, like a candle under airtight glass. Our challenge is to craft solutions to what most Americans see as problems that satisfy the following three conditions:

  1. Rely on free-market economics for the core resolution.
  2. Include some "safety-net" provisions to allay the fears of those Americans who do not have 100% confidence in their own ability to provide for their families in bad economic times.
  3. Design those provisions to be self-limiting, so that they cannot grow exponentially -- as leftist schemes like the New Deal, the Great Society, or Obamunism invariably do -- metastasize, and eventually overwhelm the capitalist core.

Free-market solutions to "market" failures, real and imagined

The first step is educational: The market cannot "fail;" the market is nothing but the conglomeration of all the transactions by all the buyers and sellers; it's like saying that the law of gravity failed because you caught hold of something before falling off a cliff.

But a "free market" can fail if freedom is curtailed by external force... i.e., by the government. The controlled or "fair market" that is left will be a grotesquely distorted caricature of a free market, without the ghostly power to guide buyer to seller by an invisible hand. The free market defines the standard: To the extent that government policy alters the natural outcome of a transaction, that policy has failed -- at least for the loser in that transaction; it has correspondingly succeeded wonderfully for the winner. (Watch Oskar Schindler in action in the opening minutes of Schindler's List for an excellent illustration of the principle.)

Let's step away from ObamaCare for a moment and talk about a different instance of the same dynamic. In the case of the housing collapse, the perverse government intervention driven by leftist activists like Rep. Barney Frank (D-MA, 100%) and Sen. Chris Dodd (D-CT, 100%), and by groups like ACORN and Rainbow PUSH, caused a few people became undeserving winners -- those who "bought" houses they couldn't really afford, but were shielded by overly liberal, biased laws from suffering the consequences; some became deserved winners -- everyone who was in good financial shape and was able to profit and "move up" when housing prices dropped... along with those politicians who schemed to enact the laws in the first place, then took advantage of their political odor of "good deeds;" and a whole bunch of ordinary folks on the margin became deserved or undeserved losers in the resulting financial catastrophe.

(The words deserved and undeserved are shorn of their usual moral implications in this case; I mean only that "deserved" means the person consciously took actions that led to failure or success; "undeserved" means success or failure was largely the result of external forces beyond the individual's control.)

The collapse of the housing bubble was a classic illustration of how government manipulation, even with "good intentions," generally causes a market to spin wildly out of control... and "the best-laid schemes o' mice an 'men gang aft agley," as Bobby Burns wrote; the control economy is overtaken by events.

(Speaking of appropriate classical references -- that Burns poem, "To a Mouse, on Turning Her Up In Her Nest With the Plough," is all about a "wee, sleekit, cow'rin, tim'rous beastie" who is evicted from her mousehole, despite all her careful planning, due to the unwelcome intervention of a large, unfeeling, external power beyond her control... to wit, a coulter or one of the blades of a plough.)

The lesson here is that any economic "reform" should hew as closely as possible to letting the market run its course; the collective decision of millions of intelligent people, each looking out for himself and his own, is almost always smarter than the brokered decision of a few weisenheimers in Washington. Thus on health care reform, we should restore a market that had already been terribly distorted by hamfisted government meddling long before Obama was elected:

  • Decouple insurance from employment, so that the connection between who gets the benefits of insurance and who pays for it is as close as possible. For example, the GOP plan could allow individuals to deduct insurance payments from their income for federal tax purposes, but not allow businesses to deduct as expenses any portion of an insurance policy they pay for their employees.

    Since a business can deduct salary as an expense, that would encourage employers not to pay for insurance... but instead to put that money into higher wages, and let the employees pay their own insurance out of it.

  • Dramatically reform tort law, particularly medical malpractice cases, to reduce lawsuit abuse.
  • Remove all rules restricting cross-state sales of health insurance.
  • Remove all "mandated" coverage and allow companies to offer any mix of policies they want, from bare-bones, minimalist catastrophic-care plus a medical savings account all the way up to a "Cadillac" plan, without any special government taxation or regulation to push insurers one way or another.
  • Allow insurance companies to charge more for customers with pre-existing conditions, then use some less distorting means of getting insurance for those unfortunates. (See the "safety net" section below).
  • Allow insurance companies to offer "group" health insurance based upon any set of customers they can imagine.
  • Remove all barriers to entry by smaller, specialized insurance carriers, subject only to requiring them to maintain sufficient capital to pay off their caims -- or require the insurers to carry insurance for an unexpected spate of claims (like from a natural disaster).

Once the perverse incentives foisted upon the health-care system by do-gooder liberals and control-freak liberal fascists are repealed, many more insurance customers will pick the kind of plans that require them to pay their doctors directly for most routine procedures -- introducing a market incentive to be a more careful health-care shopper. Likewise, the reduced need for "defensive medicine" will reduce the number of unnecessary tests and procedures whose only purpose is to set up a legal defense to the inevitable lawsuit if anything goes wrong... even if the patient was properly informed of that risk.

Therefore, the price of medical care, hence insurance, will drop markedly. And with cheaper insurance, more people will buy it -- supply and demand. Finally, none of these solutions even begins to approach the horrific cost of ObamaCare, both in money siphoned off by the federal goverment (from Medicare, student loans, general tax collections, and from the states) and in liberty.

A market-friendly safety net for the market

On a recent broadcast of Dennis Prager's show, his guest, a female psychologist, opined that unless a woman first feels safe, she cannot feel loving. I reckon it's similar with ordinary, non-ideological Americans: Unless they first feel safe, they cannot feel self-reliant. As self-reliance is the distilled essence of Americanism, our policies must first reassure the people that they will not be abandoned beside the road when they get into trouble, especially when due to simple bad luck.

But by the reverse of the same coin, we cannot allow a "safety net" to take the place of the free market itself; a safety net does not generate weath, nor even save money. It is, by definition, a distortion on the market, hence a drag on the system.

But while the free market work wonderfully in aggregate, it can be very cruel to many people to whom Fate deals a bad hand. A good example is a person born with a congential heart defect: He didn't do anything foolish or wrong, but what insurer would want to write him a health-care policy?

Typically, with group policies, insurers will not cover medical problems related to a known pre-existing condition for some period of time, often six months to one year; thereafter, they will. The feds could encourage this across the industry by levying a very small tax on each policy (passed along to the consumer) that would pay to subsidize the increase in premiums demanded by insurers of those customers who have pre-existing conditions; the subsidy would not apply to pre-existing conditions that are caused by damaging or risky behavior, such as smoking or excessive drinking. All proceeds of this tax must, by the law, be spent on premium subsidies; that becomes important in the third section below.

Insurers have the option to offer policies to such people or not, and to charge what they will; but since the market of people with pre-existing conditions is large, and the premium would be partially covered by the feds, there will always be some insurers willing to offer that coverage. (My guess: Every major insurer would cover them, since the higher premiums take into account the increased risk; it would be a lucrative business.)

This is clearly a distortion of the market; but it's a minor perturbance for the vast majority, and it resolves what most Americans see as a serious problem... without any "mandate" to buy coverage or government control of insurance policies or medical treatment. (No rationing, no death panels.) This is sort of "market-friendly safety net" I mean.

Limited vs. self-limiting

Finally, the safety net features must be self-limiting: The government cannot be allowed to profit or benefit from increasing the premium tax; if they do, then the feds will raise rates every time they need to cut the deficit. Even worse is when such cancerous growth is built right into the system, as with Medicare and Social Security. Thus, the bill itself must include provisions requiring all premium taxes to be used only for subsidizing the medical insurance of those with pre-existing conditions.

(It's true that Congress could change the law to suck some of that money away; but they can already do that. This bill wouldn't make it any easier, and it might make it harder -- since individuals would actually be able to see their tax rise, making them more willing to vote out the crooks who raised it.)

ObamaCare has a number of enacted limits; but it also has huge incentives for future Congresses to remove or violate those limitations, restrictions, and consumer protections; because when they do, they will be able to keep far more of the money for themselvs.

We need a new approach where the "default" is the free market, not government control.

In the final analysis...

The Republican plan to replace ObamaCare must be a free-market "solution," not a competing version of big-government Obamunism; it must include a safety net... but a market-driven one not in opposition to, but in harmony with, the free market; and its elements must be self-limiting, at all times refusing and removing any way for the United States Treasury to get rich quick, at taxpayer expense, via health reform.

1 comment:

Christian Prophet said...

The real reason for repealing Obamacare and other entitlement programs is to paraphrase Jesus, "thoughts held in mind produce after their kind," thus government seeing people as lacking produces people lacking. See the article "The Real Argument for Repealing Obamacare:"