Libertarians don’t have to be wackos

on Sep 10 in Politics, health care tagged by Trevor Hicks

I would think that it is pretty clear by now that I have a strong libertarian bent to my politics. Yet despite results indicating about 15%, maybe as much as 20% of the population is aligned with me philosophically, as a political force people like me are generally ridiculed by mainstream voices. Why is that?

Primarily I think it’s the fact that too often, libertarianism defines itself only by opposition to the welfare state and support for tax cuts. C’mon people, we have a welfare state, it isn’t going away and on the list of inefficient things the government does it’s pretty far down the list. To most people, constantly arguing for lower taxes and cutting welfare just looks selfish. While I agree that a government half its current size would be delightful - imagine how much better off we would be with all the people that could be employed making things rather than making rules - welfare as it is commonly understood is not a big slice of the pie.

In my opinion, a more serious government problem we face in this country has to do with what David Harsanyi calls the Nanny State. This is the notion that it’s not enough for government to help people out, it’s that an overprotective government should micromanage too many details in people’s lives. We can’t just give people money for food, we have to make a big list of which food they can buy and what they can’t. The Nanny State is also a means for people to express irrational levels of risk aversion. I’m not suggesting that humans ever could or should be perfectly risk neutral, but the Nanny State is an expression of the fantasy that nothing bad should ever happen to anyone. It’s a futile search for Cosmic Justice that causes more harm than it prevents. Libertarianism is about ensuring that the rules of the game are fair, but recognizing that outcomes don’t always turn out in ways that reasonable people might prefer. We tolerate some bad outcomes like bank failures because we believe that the attempt to optimize ridiculously complex systems like the financial industry through technocratic regulation generally make things worse. Indeed, in our latest crisis as banks cranked up the risk levels in ways that were approved by regulators and supportive of dubious political goals like increasing rates of homeownership, they could rightfully ask for bailouts since they complied with what the government had asked them to do. The regulations actually serve as a means for the banks to avoid accountability for their actions.

My libertarianism is also a reaction against the corruption of crony capitalism. Here I think is a problem of perception and not basic reality for libertarians. Because the Republicans have, for many years now, used support for “free markets” as a code for “favors for big business” or “union busting” that libertarians are suspected of merely being fellow travelers, stooges for Big Business but without all the religiosity of the Republican Party. This is hardly the case, we generally stand for deregulation and against subsidies and protectionism. In these arguments our biggest opponents are generally Big Business. The prime effect of regulation, anti-trust, subsidies and tariffs is to entrench the already powerful incumbents of industry. When more power and authority is added to the state, powerful corporate interests are always first in-line to co-opt that power to their advantage. This is why new regulations which are always sold as protection for the common individual have the perverse effect of making them powerless against the corporations that are empowered by more regulation. The last year is littered with examples, Mattel and toy inspection, the Wall Street bailouts, auto industry nationalization, the giveaway of carbon permits in Waxman-Markey, the health insurance industry lining up to support a ‘reform’ from Obama that will mandate that everyone buy their product. You don’t have to look very far back to see the entire sordid history of ethanol subsidies, tariffs against imported sugar and sugar-based ethanol. Time after time laws are passed with the intention to help out common folk or the environment that only add up to protection for Big Business.

The minimum wage is a prime example. It has been increased in the US three consecutive years leading to accelerated rates of unemployment for teenagers.  The BLS shows that teenage unemployment has jumped from around 15% at the start of 2007 to about 25% today. For comparison the overall unemployment rate has increased about 5 percentage points with the teen unemployment rate starting to climb in 2007 well before the overall rate started to increase.  Big Business loves increases in the minimum wage because it can afford the capital investments to automate tasks previously done by unskilled labor (noticed more self-scan checkout lines the last couple of years? It ain’t the result of any fancy new technology). Mom & Pop outfits can’t compete and either fail to expand or go out of business. The net result is fewer jobs for unskilled workers and less competition for Big Business.

The health care debate reveals all of these themes, many libertarians are up in arms about the prospect of government paying for even more health care. Guess what, we already have a socialized health care system, about half of every health care dollar is already spent by government and Medicare reimbursement rates and policies are the standard template for how private health insurance is run. We are already there and it’s why our system is so inefficient in many ways. Expanding the blanket of coverage to a few million more people is a fine idea. The problem is that instead of just handing a simple voucher to lower income people to help them purchase insurance or health care, the reformers want to layer yet more programs, bureaucracy and control onto an already inefficient system. And they want to do it in a way that eliminates future challenges to insurance companies, drug makers and the AMA. The ‘public option’ is a complete red herring, we already have large non-profits in the insurance industry. I fail to see how adding one more makes any difference. And if, as Obama says, a public option like we have in higher education is such a grand idea for keeping costs down, why is that the one industry where price increases have managed to keep up with health care in recent years?

So I say, as a libertarian, fine let’s expand coverage from the government to the poor and chronically ill. But let’s pay for it by means testing Medicare. Medicare and Social Security as they currently exist are Ponzi schemes whereby prior generations rob subsequent generations. Old people, on average, have way more money than young people, yet the young have to pay for the medical care and retirement of the old at rates far in excess of any reasonable rate of return on their contributions. I would much prefer that my taxes pay for the care of the young and poor than the old and rich. Means testing the old to make room for the needy fits just about anyone’s definition of fair.

Obama says he understands that customers do better when there is choice and competition. Indeed this is the fatal flaw of any type of single-payer plan - the right of exit is crucial to keeping institutions accountable. But what he doesn’t seem to get is that the health care industry sees patients as an input in their service process and not the customer. The true customer is the doctor ordering the treatment and the the institution paying the bill - insurance companies and the government. True reform would put the patient back in the driver’s seat as the customer and this implies making patients pay out of pocket for all routine expenses.

Deregulate insurance, start by ending the favorable tax treatment of employer-provided health insurance. The states could help by eliminating mandatory coverage minimums. Low cost coverage that would really be beneficial to a lot of people in protecting them from catastrophic illnesses is actually illegal in many states. Relax licensing requirements for health care providers for most forms of basic care and wrest control of dispensing pharmaceuticals from physicians. There are just many things the government could do to make our health care system more efficient and more accessible by doing less, not more. And the ‘more’ that it can do should be kept as simple as possible, as I suggested just give people vouchers are add them to the existing Medicare system. The only really thorny problem that really needs a government solution is providing care to the uninsurable, chronically ill.

So you see, libertarianism doesn’t have to just be about opposing Robin Hood policies that ultimately are not very expensive. For me it’s about keeping the interventions of government simple and effective, paying attention to the incentives created and mindful of the unintended consequences. It’s about preserving the freedom of individuals to live their lives how they want including the right to make choices most of us think are stupid. It’s permitting businesses to serve customers in ways that are both appealing and profitable. It’s about focusing on keeping the rules fair and not sweating the outcomes so much and in exchange being comfortable with a safety net welfare state that helps out the unlucky and, yes, the lazy. Doesn’t seem so wacko to me.