Let me start with the observation from Hilaire Belloc. In his book The Servile State, Belloc writes that “The control of the production of wealth is the control of human life itself.”
I rather doubt that President Obama or any of his inner circle is a student of Hilaire Belloc. But they have demonstrated again and again their intuitive grasp of Belloc’s insight. If only, they reason, they can turn over enough of the productive capacity of the country to the government, then (so they think) they will be in a position to eradicate the age-old irrationalities and inequities that have beset our capitalist society from the beginning.
Belloc knew better, and a lot more could be said about the likely results of the Obama administration’s ambition to control the production of wealth. For the moment, however, I just want you to bear Belloc’s point in mind as you ponder an excellent piece about the Obama administration’s plans for health care by N. Gregory Mankiw. I hope you will put your prejudice to one side when you learn that 1) not only is Mankiw is a professor of economics but also he practices that discipline at Harvard and 2) his piece appeared in The New York Times. Notwithstanding Harvard, notwithstanding even The New York Times, “The Pitfalls of the Public Option” piece casts the cool light of sanity on what the Obama administration wishes to do to health care.
What is the public option option? It is one part rhetorical subterfuge combined with three parts government control. Professor Mankiw quotes from a letter President Obama sent to Senators Edward M. Kennedy of Massachusetts and Max Baucus of Montana: “I strongly believe,” Obama wrote, “that Americans should have the choice of a public health insurance option operating alongside private plans. This will give them a better range of choices, make the health care market more competitive, and keep insurance companies honest.”
OK. Let’s play “What’s wrong with this picture?” Let’s say we opt for the “public option.” What would it mean? If the government got more heavily involved in health care (beyond what it already does with the Veterans Administration, Medicare, and Medicaid), would that actually give Americans “a better range of choices,” where by “better” Obama might have meant “more choices,” “higher quality choices,” or both? What do you think? While you decide what is the best way of expressing the conclusion “no, absolutely not,” ask yourself whether an industry that had a “public option,” i.e., that was government controlled with the unlimited power of sanction that government control implies: ask yourself, I say, whether that would encourage or discourage competition? Imagine that the government got into the business of garbage removal. How would you feel about setting up shop with your own competing Acme Dispose-All Company? How would you fare against an entity that wrote all the rules and had at its disposal the resources of the public purse? As for the insurance companies, why should we think that the granddaddy of all insurance companies, i.e., the U.S. government, would be more honest when distributing scarce resources than the 1300 or so companies that now compete for your business are?
Professor Mankiw has this to say: “Even if one accepts the president’s broader goals of wider access to health care and cost containment” — and who doesn’t? — “his economic logic regarding the public option is hard to follow.” Professor Mankiw is a generous spirit. By “hard to follow,” he really means “completely bogus.” He goes on:
Consumer choice and honest competition are indeed the foundation of a successful market system, but they are usually achieved without a public provider. We don’t need government-run grocery stores or government-run gas stations to ensure that Americans can buy food and fuel at reasonable prices.
Indeed. And here is the $64,000 — I mean, the $1.85 trillion — question:
An important question about any public provider of health insurance is whether it would have access to taxpayer funds. If not, the public plan would have to stand on its own financially, as private plans do, covering all expenses with premiums from those who signed up for it.
But if such a plan were desirable and feasible, nothing would stop someone from setting it up right now. In essence, a public plan without taxpayer support would be yet another nonprofit company offering health insurance. The fundamental viability of the enterprise does not depend on whether the employees are called “nonprofit administrators” or “civil servants.”