With great trepidation I shall attempt to organize thoughts on health care reform while Congress is in recess, having not yet passed a bill. I have certainly had considerable evolution in my view of this issue over the last several years. In my college days, I advocated a single-payer national health insurance plan, similar to the Canadian model; a position antithetical to the stated purpose of this blog (the promotion of limited government). I was persuaded by the theoretical cost savings of covering everyone and preventing chronic disease from becoming more expensive to treat when not prevented or treated early. I also, at the time, agreed with the moral imperative to make sure every American had access to health care - nearly acknowledging that health care is a right. Observing the Canadian health care system by observing care my Canadian relatives have received, I do think it is a good system. However, there are serious limitations to it that should not be overlooked. What is missing from debate in Washington these days is any sort of serious discussions of pros and cons; rather each side would rather engage in hyperbolic rhetoric. The left pretends that reform will cost nothing, either in terms of financial cost or a loss of things that are good about the current U.S. system. The right pretends that this is, "socialized medicine," and that health care in Canada is similar to a third world country. Neither side is being honest with the American people. Honesty requires the left to make a case that there is a moral imperative to extend health insurance coverage to more (or all) Americans and not to allow one-sixth of the population to remain uncovered; but that that will come at certain costs. Honesty requires the right to admit that health care will be pretty good for all of us under a government plan, but to question whether covering the extra people is worth the losses in terms of innovation in health care and the proliferation of health care resources that prevents shortages and queues; and to ask whether there aren't better ways to expand coverage (if not quite providing universal coverage) without asking the 85% of Americans with coverage to give up some of what they have. Most importantly, honesty requires acknowledging that this debate is more about how to cover Americans than it is about controlling health care costs (something the administration claims is the reason a bill must be passed) and to recognize that this is a health insurance problem, not a health care crisis. If we persist in discussing this issue on the terms that it is not about a commodity called health insurance, but rather that it is about a right to health care, then there will be no room for honest debate.
IS HEALTH CARE A RIGHT?
As I have reflected about the nature of rights, I have changed my view since those college days. Rights are innate; they are things everyone possesses naturally. They can be taken away, forcibly, but without extrinsic force, an individual possesses them. life, liberty, free speech, freedom of conscience/religion are all clear examples of rights. Commodities are things one acquires and has a right to in as much as one has legitimately acquired them Hence the concept of property rights and ownership. It seems to me that health care, a service provided by practitioners in return for payment, therefore is a commodity. It is a very basic one, a very necessary one, and one in which it still might be reasonable to provide for all as a matter of public policy, but that does not make it a right. Calling it a right ends all debate. If it is a right, then there can be no argument over whether or not society needs to provide it to everyone. Not only that, if it is a right, everyone is entitled to an equal amount of it; just as everyone is has the same ability to speak freely, assemble freely, or worship freely. If health care is a right, physicians and nurses are obligated to provide it, with or without payment for services. We treat no other good or service this way. Even food and housing, more basic needs than health care, are commodities for which payment is expected and for which there is accepted disparity between what one person can afford compared to another. The wealthy person lives in a mansion and eats fillet mignon, the less well off person rents and apartment and brings home KFC. I think we can have a discussion about what role government can or should play in providing coverage for people or expanding access for people, but we have to understand that we are talking about the commodity of health insurance coverage, not a God-given right.
MODELS OF REFORM
Before proceeding, it is important to come to terms with what we are actually talking about. For the sake of simplicity I'd like to limit discussion to three different models that I have some familiarity with: 1) the United States, the country in which I live and practice medicine; 2) Canada, the country in which most of my extended family lives; and 3) the United Kingdom, the country where most of my wife's extended family lives. The models of health care delivery are quite different in these three countries. Since World War II, the United States has moved from a system of fee-for-service (doctors and hospitals charge patient's directly for the service they render) to a system of third party payers. For most, the third party payer is a private insurance company, for some (the very poor that get Medicaid, the elderly that receive Medicare, or congressmen) it is the government, and some are uninsured. Rationing of resources in this system is first by income (those who can afford coverage or have coverage as an employment benefit) and secondly by insurance companies, who are, for many Americans, the final arbiters of what is covered and what is not. Like the United States, Canada has a third party payer system. The difference is only a single third party payer, the government. Hospitals and doctors are still owned privately and collect fees for service, but reimbursement rates for doctors and hospitals are set by the single payer, the government. The Canadian system is what the U.S. would be like if everyone had Medicare. The United Kingdom, on the other hand, has a true system of socialized medicine. The government owns hospitals and health care resources and most physicians work for the government. Not only does the government regulate the payment of health care professionals, it also regulates how health care resources are distributed. The UK system, therefore, is analogous to the VA medical system in the U.S.
WHAT IS "OBAMA CARE?"
With that in mind, let's move on to what is actually being discussed in Washington. First of all, no one, and I mean no one, is promoting actual socialized medicine in the UK model in which the government would take complete, or near complete ownership, of the industry (as it has with the financial and automotive industries); employ the doctors and dictate to them how to practice; and directly ration the allocation of resources. You would never know it based on the rhetoric of some on the right, but such charges are deliberate scare tactics. Furthermore, many private insurance companies ration care to a far greater degree than government programs, such as Medicare.
Most on the left advocate a Canadian-style single payer system. This system has the advantage of providing a high level of health care to everyone (universal coverage). There are still legitimate reasons to be wary, however. First, it would represent a large expansion of federal government and a very expensive new entitlement. Secondly, it would amount to a government takeover of the health insurance industry which is of dubious constitutionality. Finally, the Canadian experience is a classic example of how government price setting creates shortages. Doctor's fees in Canada are set by the federal government and as a consequence, many doctors have left Canada. Canada ranks 24th out of 28 industrialized nations in doctors per 1,000 population (source: http://www.nationalpost.com/opinion/story.html?id=222287). Canada has 2.1 doctors per 1,000 population compared to 2.4 in the U.S. (source: http://ec.europa.eu/health/ph_information/dissemination/echi/echi_18_en.pdf). At one point in the mid-90's, Canada was losing 400,000 doctors per year, about one in nine Canadian medical graduates leave the country and 80% of doctors that leave go to the United States (source: http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=2645159).
In the United States, by contrast, medicine is very profitable. This profitability has driven innovation and created cutting edge, high quality treatments, that while expensive, save lives (http://www.washingtonpost.com/wp-dyn/content/article/2009/07/25/AR2009072502381.html). Furthermore, U.S. hospitals can reinvest the money they earn into buying new equipment and offering more services. The small (250-bed), non-profit hospital in downtown Baltimore at which I work, in the seven years I have been, on the medical staff; has expanded the Emergency Department; built a new outpatient cancer/women's health center, with its own operating rooms; bought a second MRI scanner and then replaced the first one with a newer scanner; added a third CT scanner; and is in the process of building a new, larger, hospital! The single payer system in Canada is responsible for the relative scarcity of health care resources (compared to the U.S.) that can create queues and long waits for treatments.
However, the single-payer system is not even what is on the table in now in Washington. Since the President has been deliberately vague and there is no actual bill yet from Congress, it is hard to discuss specifics, but we can discuss the general proposal that the President has talked about. The general plan is to require employers with payrolls over $500,000 to provide employees with health insurance or pay and 8% tax payroll tax. Those not covered by employer provided insurance can opt into a public, government funded plan, that would function like the single payer system in Canada. In addition health insurance would become portable so a person can keep their insurance if they lose their job and there would be restrictions on denying coverage due to pre-existing conditions. The selling points of the plan are that everyone would have access to coverage and that people who like their current insurance coverage would, ostensibly, get to keep it.
But, the public option is a Trojan horse. Many employers may find an 8% payroll tax cheaper than what they pay in health insurance premiums for their employees and subsequently drop their coverage, forcing their employees into the public plan. Former Speaker of the House Newt Gingrich and former Vermont Governor Howard Dean debated this issue on the August 9, 2009 broadcast of ABC's This Week (In my opinion, both Speaker Gingrich and Governor Dean are men of substance and worth listening to, whether one agrees with them or not). Speaker Gingrich cited a study that suggested as many as 130 million Americans would lose their current coverage under the plan (as currently crafted in the bill that passed in the House). Dr. Dean dismissed that study as one funded by the health insurance industry, but acknowledged that the Congressional Budget Office (CBO) estimated 5-10 million Americans would lose their current coverage. This is actually an astounding admission. The administration argues that if you like your current coverage, nothing has to change; but under the bill that passed in the House, by any estimate, millions of Americans will actually be forced to change their coverage (and probably rely on the public plan). The left maintains that the public plan only provides, "more competition," for the private insurance market, which will be to the benefit of consumers. However, when one competitor can insure people at a loss (deficit spend) and also sets the rules of the competition (health care legislation and regulation), it is hardly accurate to call this competition. The public plan is a tentative first step to the gradual establishment of a single payer system, with all the advantages and drawbacks of such a system as previously described.
PAYING FOR HEALTH CARE
The President has insisted that Congress find funding for health care reform (the buzz word is, "deficit neutral") and that it control health care costs, which have been growing faster than inflation. Such a plan can hardly be deficit neutral. The creation of a public health insurance plan would create a new entitlement that would commit our government to ever escalating spending. Covering more people, for longer if the universal (or near universal) coverage increases life expectancy can only cost the tax payers a lot of money. Currently, Medicare spending is one of the largest pieces of the federal budget. In short, it will be expensive and in the absence of tax increases on everyone, it is hard to see how it would be deficit neutral. In fact, the CBO declared that the current plan that passed in the House was not (source: http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=14085725). But, would it control costs?
According to the World Health Organization (WHO), the United States spends about 15% of its Gross Domestic Product (GDP) on health care. By contrast, Canada spends about 10% of GDP on health care. Canada also spends less per capita on health care. Proponents of government reform, particularly single payer reform, point to these statistics and argue that Canadians get just as much service (or nearly so) for less. However, these statistics ignore the fact that health care costs have been spiraling out of control in Canada as well. Health care spending in Canada has also been increasing faster than inflation and hit a record high last year, causing some in Canada to question whether the Canadian system is sustainable (source: http://www.cbc.ca/health/story/2008/11/13/health-spending.html).
In his book, Free to Choose, Nobel prize-winning economist Milton Friedman discusses government spending and this discussion, indirectly, explains why no third-party payer system, whether public or private, can control costs. According to Friedman, there are four types of spending: 1) you can spend your own money on your self, in which case you have incentives to both spend as little as possible and to get the most value for your money, 2)you can spend your money on someone else, in which case you have still have an incentive to spend as little as possible, but not necessarily to get the best value for your money, 3) you can spend someone else's money on you, in which case you still have an incentive to get the best value, but not necessarily to spend as little as possible, and 4) you can spend someone else's money on yet someone else, in which case you don't have an incentive to either get the best value or spend the smallest amount possible. Third party health payments, particularly government ones, are category 4. Private payments may be category 2, but even this is not much of check on costs because the consumer of health services is not paying directly and as treatments become more advanced, they will become more expensive. A government insurance plan will do little to limit the escalation of health care cost, it will merely shift the cost from the private sector to our heavily indebted federal government.
In the final analysis, there are only two ways to control costs. The first is to ration care (as private insurance companies do to varying degrees) as in the British model. In Britain, the government is not only the third-party payer, it is the allocator of health care resources. For example, in the United States, having end stage renal disease makes one automatically eligible for medical disability and Medicare and Medicare covers the cost of dialysis treatments. In other words, the United States has made a policy decision that no American should die because of a lack of access to kidney dialysis. In Britain, your eligibility for dialysis is determined based on your age and other medical comorbidities. This type of government rationing does control costs, but most Americans would find this unacceptable. The second way to control costs is not to have third party payers at all, but rather have the actual consumers of health care foot the bill (a true fee-for-service system). Then health care spending would by Type 1 and patient's would have greater incentive to take better care of themselves and get the best value for their money. Furthermore, in a true market system (which the private health insurance is not, for a variety of reasons), costs cannot rise higher than the market will bear or higher than than capacity of consumers to pay. If they do and no one can afford the service, those that provide the service will go out of business. A market system would give an incentive to doctors to charge a little as possible, to keep patients, rather than to charge as much as possible to a third party payer. However a true free market, fee-for-service, system does nothing to expand coverage and rations care solely based on one's ability to pay, an outcome many also find unacceptable.
THE REAL DEBATE
Getting beyond the scare tactics, then, the real debate is not between socialized medicine and free market medicine, neither of which are actually on the table; it is not between rationing, which will happen with either private insurances or a government plan and unlimited coverage; and it is not, despite all the President's disingenuous rhetoric, about controlling health care costs (although perhaps it should be). The debate is about how to expand health insurance coverage for the 47 million Americans who do not have it, whether it is a proper role for federal government to expand coverage, how to pay for such coverage, and how much is reasonable to ask the vast majority of Americans with coverage to sacrifice to provide such coverage.
Universal coverage would have the advantages of, potentially, a healthier population; less utilization of Emergency Services; and, in the case of government health insurance, shifting a cost burden off corporations and potentially making them more competitive with their overseas competitors. Universal coverage sounds like a noble goal, but it will come at a price. The price, as discussed above, is a loss of innovation in medicine and the potential to create a shortage of health care resources. If the American public is persuaded that what is lost in transition to a Canadian-style system is worth the moral imperative of expanding coverage, then reform with a public option will pass; if not, then it will not. But, that is the case the President should be making if he is honest with the American people, not trying to scare them into thinking their health care will become unaffordable if his plan is not passed. Likewise, the right needs to argue that the costs are not worth the gains and propose other ways to expand coverage without sacrificing the things we would all like to preserve about health care in the United States.
WHERE DO WE GO FROM HERE?
On thing that has not changed as I have reflected on this issue over the last two decades is that I continue to believe Canadians enjoy great health care. Health care in Canada is, arguably, second only to the United States and everyone has coverage. Such a system is nothing to be afraid of, but neither is it a panacea. It simply substitutes one set of problems for another. The single-payer system stifles innovation, contributes to shortages of resources, and shifts costs to tax payers without doing much to control them. Furthermore, I am not convinced that our federal government truly has the Constitutional authority to become such a large player in the market place (although the precedent has certainly been set with it's take over of AIG and GM). I am also not convinced of our government's ability to manage anything competently or cost-effectively. Finally, I think in the midst of recession and with federal deficits reaching unprecedented levels, and both entitlement spending and interest on the national debt accounting for an ever growing percentage of the federal budget, I do not think now is the time to contemplating any new entitlement programs. Having framed the debate, I think it is a better debate to have another day.
Despite my free market principles (and the growing phenomenon of concierge care), I am also not naive enough to believe that the genie of third party payers can be put back in the bottle. I do think there are ways to harness market forces to both reduce costs and expand coverage (although this would fall well short of universal coverage). For example, Safeway has reduced the cost of health care for its employees by 40% by providing incentives for healthy living in the form of lower premiums in return for lifestyle modification such as smoking cessation, weight loss, exercise, or meeting goal cholesterol levels (source: http://online.wsj.com/article/SB124476804026308603.html). Senator McCain's campaign proposal to allow purchase of health insurance coverage across state lines would expand coverage by letting individuals purchase less expensive plans from other states and would provide increased competition in the health insurance industry to help drive down costs. Currently health insurance companies operate in carved out niches, protected by competition from other states and in many states a handful of insurers account for the vast majority of the insured. This lack of competition can only benefit insurance companies at the expense of health insurance consumers. In medical school I, and others, wrote a paper discussing likely changes to the health care system by 2010. We discussed a proposal in the news at that time that would allow individuals to deduct their health insurance premiums from their income taxes, the way businesses who provide health insurance do, which would help individuals who did not receive health insurance from their employer purchase individual plans. I would also favour true health savings accounts that would allow the young and the healthy, who aren't likely to require much coverage at that point in their lives, to put money away, tax free, that can be withdrawn at any time later in life for health expenses. Perhaps, for now, such modest measures will have to suffice.
Many thanks to all that I have been discussing this issue with over the last several months: lay persons, physicians, and other health professionals; residents of the U.S., Canada, and New Zealand; liberals, conservatives, and moderates; all of whom have helped me finally organize some, I hope, coherent thoughts on a topic I have wrestled with for a long time.
Saturday, August 8, 2009
Saturday, June 20, 2009
Iran
Protests of the recent election results in Iran continue and Ayatollah Ali Khamenei, the leader of the clerical wing of Iran's government (and probably the true source of political power in Iran) has promised that they will be forcibly suppressed. Because Iran is a essentially a totalitarian police state, we will never know whether or not President Ahmadinejad was indeed popularly re-elected. However, as discussed last week on Meet the Press by Vice President Biden, there are reasons to be skeptical of the result. Ahmadinejad was apparently declared the winner before voting was completed. The voting was reported as percentages of blocks of millions of votes, rather than a province-by-province tally as has been the case in previous elections in Iran. Furthermore, the percentages garnered by Ahmadinejad did not change regardless whether the bloc was rural, where Ahmadinejad enjoys broad popular support, or urban, where opposition candidate Mousavi is popular (and including, apparently, Mousavi's home town). The Iranian government's response to the protests - sharp police crackdown and blackouts of cell phone service and internet access - also raises suspicions about the veracity of the election results. It is unlikely that the issue will be resolved to satisfaction as the person ultimately responsible for investigating allegations of fraud is the same person who certified the results initially and who has backed Ahmadinejad from the beginning - Ayatollah Khamenei.
In January 2005, I wrote an essay discussing similar, peaceful, protests of election results in Ukraine (posted on this blog on April 26, 2008: http://freemarkets-freeminds-freesociety.blogspot.com/2008/04/orange-revolution.html). The comparisons and contrasts between the current protests in Iran and the Orange Revolution in Ukraine illustrate key points about the origins of liberty.
First, democracy is no guarantor of liberty. Not only are elections corruptible, as the current situation in Iran attests, but they can also serve as vehicle for consolidation of government power at the expense of liberty. It should not be forgotten that, although the National Socialist party never achieved a majority in the Reichstag, it did achieve a plurality, through democratic means, that allowed it to form a coalition government with Adolph Hitler as Chancellor. This ended the Wiemar Republic and established the most brutal police state the world has ever known. In Putin's Russia and Chavez' Venezuela, popularly elected Presidents have governed as virtual autocrats. Furthermore, although majority rule is an important principle in liberal democracy, for a society to be truly free, the rights of the minority must be respected and protected. In other words, the will of the majority has limits. Even if the official results of the recent elections in Iran are accurate, the crackdown on protest and dissent demonstrates that Iran has a long way to go to become a free society. The right of a political minority to peaceably assemble and dissent is a critical component of liberal democracy. Ukraine took an important step toward liberal democracy when it allowed Victor Yushchenko's supporters to protest the election results. Unfortunately, Iran seems committed to not taking this step.
Secondly, as important as free, fair, and transparent elections are to liberal democracies, civil institutions that protect minority and individual rights are more important. In the United States, this is accomplished by a written Constitution that limits the power of government and the checks and balances between the three branches of federal government, the federal government and state governments, and the public and private sectors. A key component of this that we in the U.S. take for granted is an independent and impartial judiciary. In Ukraine's Orange Revolution, the court, appointed by the ruling party that had ostensibly beaten Yushchenko's opposition in the election, asserted its independence and established a principle of judicial review when it discarded the fraudulent election results and ordered a re-vote. In Iran, no such independent review of the election results exists.
Finally, a free society must respect the individual property rights of its citizens and private ownership. In his thought-provoking book, The Future of Freedom, Fareed Zakaria examines the relationship between capital and liberty. Governments that rely on their citizens to produce wealth, in the end are fertile ground for liberal democracy because a legal framework protecting private ownership and individual rights will emerge to promote the economic growth on which the government depends. Although an oil rich state, Iran has a dynamic, non-oil, economy and a per capita income (in 2003-4) of somewhere between $5,000-$6,000 USD; the level of wealth production Zakaria suggests could provide fertile ground for liberal democracy. Iran, once a cradle of civilization, still has the potential to join the 21st century as a vibrant liberal democracy, but only if those other conditions are met. Only then will elections be fair and transparent and only then will the Iranian government rule with the consent of the governed. Elections are not the starting point of liberty, but rather the endpoint. The reward of a free society ready to govern itself.
It seems this is not the moment for the birth of Iranian liberty. But the response to the suspicious election results shows that Iranians are ready and the seeds of their ultimate liberty are being planted today. Iran's nuclear program has been a concern to the U.S. because Iran has been, essentially, a rogue-terrorist state. Iran's transformation into a liberal democracy that is a valued member of the community of nations will neutralize such a threat. The United States needs to be prepared to extend an open hand not to Ahmadinejad, but to the Iranian people who have demonstrated the same yearning for freedom that we have as Americans. Our policies must show us to be friends of the Iranian people, even when we are opposed to the Iranian government. The time may not be now, but the time is coming when the Iranian people will seize control of their own destiny.
In January 2005, I wrote an essay discussing similar, peaceful, protests of election results in Ukraine (posted on this blog on April 26, 2008: http://freemarkets-freeminds-freesociety.blogspot.com/2008/04/orange-revolution.html). The comparisons and contrasts between the current protests in Iran and the Orange Revolution in Ukraine illustrate key points about the origins of liberty.
First, democracy is no guarantor of liberty. Not only are elections corruptible, as the current situation in Iran attests, but they can also serve as vehicle for consolidation of government power at the expense of liberty. It should not be forgotten that, although the National Socialist party never achieved a majority in the Reichstag, it did achieve a plurality, through democratic means, that allowed it to form a coalition government with Adolph Hitler as Chancellor. This ended the Wiemar Republic and established the most brutal police state the world has ever known. In Putin's Russia and Chavez' Venezuela, popularly elected Presidents have governed as virtual autocrats. Furthermore, although majority rule is an important principle in liberal democracy, for a society to be truly free, the rights of the minority must be respected and protected. In other words, the will of the majority has limits. Even if the official results of the recent elections in Iran are accurate, the crackdown on protest and dissent demonstrates that Iran has a long way to go to become a free society. The right of a political minority to peaceably assemble and dissent is a critical component of liberal democracy. Ukraine took an important step toward liberal democracy when it allowed Victor Yushchenko's supporters to protest the election results. Unfortunately, Iran seems committed to not taking this step.
Secondly, as important as free, fair, and transparent elections are to liberal democracies, civil institutions that protect minority and individual rights are more important. In the United States, this is accomplished by a written Constitution that limits the power of government and the checks and balances between the three branches of federal government, the federal government and state governments, and the public and private sectors. A key component of this that we in the U.S. take for granted is an independent and impartial judiciary. In Ukraine's Orange Revolution, the court, appointed by the ruling party that had ostensibly beaten Yushchenko's opposition in the election, asserted its independence and established a principle of judicial review when it discarded the fraudulent election results and ordered a re-vote. In Iran, no such independent review of the election results exists.
Finally, a free society must respect the individual property rights of its citizens and private ownership. In his thought-provoking book, The Future of Freedom, Fareed Zakaria examines the relationship between capital and liberty. Governments that rely on their citizens to produce wealth, in the end are fertile ground for liberal democracy because a legal framework protecting private ownership and individual rights will emerge to promote the economic growth on which the government depends. Although an oil rich state, Iran has a dynamic, non-oil, economy and a per capita income (in 2003-4) of somewhere between $5,000-$6,000 USD; the level of wealth production Zakaria suggests could provide fertile ground for liberal democracy. Iran, once a cradle of civilization, still has the potential to join the 21st century as a vibrant liberal democracy, but only if those other conditions are met. Only then will elections be fair and transparent and only then will the Iranian government rule with the consent of the governed. Elections are not the starting point of liberty, but rather the endpoint. The reward of a free society ready to govern itself.
It seems this is not the moment for the birth of Iranian liberty. But the response to the suspicious election results shows that Iranians are ready and the seeds of their ultimate liberty are being planted today. Iran's nuclear program has been a concern to the U.S. because Iran has been, essentially, a rogue-terrorist state. Iran's transformation into a liberal democracy that is a valued member of the community of nations will neutralize such a threat. The United States needs to be prepared to extend an open hand not to Ahmadinejad, but to the Iranian people who have demonstrated the same yearning for freedom that we have as Americans. Our policies must show us to be friends of the Iranian people, even when we are opposed to the Iranian government. The time may not be now, but the time is coming when the Iranian people will seize control of their own destiny.
Saturday, May 23, 2009
Where's the Beef?
Four months ago, Barack Obama was sworn in as the 44th President of the United States. In an historic inauguration, he became the first African-American, or indeed any ethnic minority, to become President. After eight years of the unpopular Bush administration, the changing of the guard was welcome to most Americans. The fresh face elected to the highest office in the land not only looked different, but promised something different. Barack Obama was coming to the White House to bring, "Change We Can Believe In." The disastrous policies of the Bush administration will be undone as a new day dawns in America....
But those of us who observe politics closely can only note that in almost every election, the "out party" complains about the excesses of the "in party," rides the abuses of the "in party" to victory and then becomes the new "in party," and proceeds to continue to exercise the power it previously complained about, but for which the previous government set precedent. Such behaviour is as old as the republic itself (consider Jefferson's Second Revolution in 1800, in which he rode the issue of the Alien and Sedition Acts to power, abolished them, and then proceeded to use state sedition laws to prosecute those that disagreed with his government) and perhaps as old as democracy itself. President Obama is no exception. For all his talk about change, the President has remained committed to continuing and fulfilling the policies of his predecessor, George W. Bush.
To the careful observer, it is not surprising that the policies of the Obama administration are similar to the Bush 43 administration. After all, Barack Obama campaigned as a liberal and the Bush administration was the most leftist administration in four decades. My recent open letter to President Bush describes the left-wing policies of his administration in detail (http://freemarkets-freeminds-freesociety.blogspot.com/2009/01/open-letter-to-president-george-w-bush.html), but the highlights included a new federal health care entitlement, an increased role of federal government in education, massive domestic spending, socialization of financial industry, and a proposal for a federal "car czar" to give government control of the auto industry. While I know of no specific education proposal from the Obama administration, his White House has made an even larger and more unaffordable health care entitlement a priority. His administration has continued to socialize the financial industry by bailing out and buying large shares in more and more banks, and his car "politburo" now essentially runs GM and Chrysler and the President himself canned the GM CEO. Massive government spending continues. Candidate Obama took issue with one major Bush administration domestic policy - the tax cuts. President Obama, however, is quite content to let them continue and has no plans to repeal them (they will, however, expire if not renewed by Congress, in 2011).
In foreign policy and national security, President Obama has pursued a similar course to President Bush as well. Although rhetoric has changed, policy has not. President Obama announced the closing of Gitmo, but has no real plan to do so. Furthermore, he has promised not to release any enemy combatants that cannot be tried but are still a danger (presumably he decides whether they are dangerous or not). Therefore, open ended detentions will continue whether at Gitmo or not. After promising due process and a right to a trial to those detained, President Obama has decided to return to the military tribunals established by his predecessor. The surprising insurgent candidacy of Senator Obama owed its success, in part, to his opposition to the war in Iraq, his opposition to the surge strategy in Iraq, and his promise to end that war. President Obama views the Bush exit strategy for Iraq as adequate and has made no effort to modify the status of forces agreement President Bush negotiated with the Iraqi government in order to hasten our withdrawal. Besides, those troops aren't coming home, signaling and end to our foreign adventurism, when they leave Iraq they will be deployed in Afghanistan. But, the most chilling Bush administration security policy was its illegal eavesdropping on mobile phone calls made overseas. Yet, in the late stages of the campaign, Senator Obama voted for the bill that essentially retroactively endorsed that policy, gutted the authority of the FISA court and gave the federal government a longer time limit to eavesdrop on someone without a warrant. Now his administration happily uses this authority to "keep us safe." Senator Obama said he would not support the bill if it granted immunity for telecom companies that assisted the Bush administration in their illegal eavesdropping. The bill did grant such immunity and Senator Obama still voted for it (see the following article for a nice discussion of the new FISA law: http://www.slate.com/id/2194254/pagenum/all/ ).
The Bush 43 administration was a serious threat to the liberty of American citizens. It grew the size and scope of government at an alarming rate, it usurped the authority of state governments, it amassed debt that our descendants will never be able to repay, it made a mockery of private ownership when it bought large portions of the financial sector, it went to war without a declaration from congress and defined the war in open-ended way to seize war powers indefinitely, it detained people without charges, and it illegally eavesdropped. In November 2006 and November 2008, the American people said, "enough," and ousted Republicans from both the legislative and executive branches of government. Presumably these voters wanted, "change." Presumably these voters wanted Bush policies to end. Presumably these voters did not want a President who would essentially represent a "Bush third term." The irony is, a Bush third term is exactly what the voters got. Under President Obama, questionable detentions and increased government eavesdropping will continue, foreign adventurism will continue, new health care entitlements will be created, runaway spending will continue, socialization of the financial industry will continue. In no substantial way are the policies of the Obama administration different from those of the Bush administration (oh, except for a few federal dollars for embryonic stem cell research, hurray change!). I am reminded of Walter Mondale's reference to a popular TV commercial of the mid 1980's when he challenged the lack of substance to Gary Hart's, "new ideas." For all the President Obama's talk about change we can believe in, "where's the beef?"
But those of us who observe politics closely can only note that in almost every election, the "out party" complains about the excesses of the "in party," rides the abuses of the "in party" to victory and then becomes the new "in party," and proceeds to continue to exercise the power it previously complained about, but for which the previous government set precedent. Such behaviour is as old as the republic itself (consider Jefferson's Second Revolution in 1800, in which he rode the issue of the Alien and Sedition Acts to power, abolished them, and then proceeded to use state sedition laws to prosecute those that disagreed with his government) and perhaps as old as democracy itself. President Obama is no exception. For all his talk about change, the President has remained committed to continuing and fulfilling the policies of his predecessor, George W. Bush.
To the careful observer, it is not surprising that the policies of the Obama administration are similar to the Bush 43 administration. After all, Barack Obama campaigned as a liberal and the Bush administration was the most leftist administration in four decades. My recent open letter to President Bush describes the left-wing policies of his administration in detail (http://freemarkets-freeminds-freesociety.blogspot.com/2009/01/open-letter-to-president-george-w-bush.html), but the highlights included a new federal health care entitlement, an increased role of federal government in education, massive domestic spending, socialization of financial industry, and a proposal for a federal "car czar" to give government control of the auto industry. While I know of no specific education proposal from the Obama administration, his White House has made an even larger and more unaffordable health care entitlement a priority. His administration has continued to socialize the financial industry by bailing out and buying large shares in more and more banks, and his car "politburo" now essentially runs GM and Chrysler and the President himself canned the GM CEO. Massive government spending continues. Candidate Obama took issue with one major Bush administration domestic policy - the tax cuts. President Obama, however, is quite content to let them continue and has no plans to repeal them (they will, however, expire if not renewed by Congress, in 2011).
In foreign policy and national security, President Obama has pursued a similar course to President Bush as well. Although rhetoric has changed, policy has not. President Obama announced the closing of Gitmo, but has no real plan to do so. Furthermore, he has promised not to release any enemy combatants that cannot be tried but are still a danger (presumably he decides whether they are dangerous or not). Therefore, open ended detentions will continue whether at Gitmo or not. After promising due process and a right to a trial to those detained, President Obama has decided to return to the military tribunals established by his predecessor. The surprising insurgent candidacy of Senator Obama owed its success, in part, to his opposition to the war in Iraq, his opposition to the surge strategy in Iraq, and his promise to end that war. President Obama views the Bush exit strategy for Iraq as adequate and has made no effort to modify the status of forces agreement President Bush negotiated with the Iraqi government in order to hasten our withdrawal. Besides, those troops aren't coming home, signaling and end to our foreign adventurism, when they leave Iraq they will be deployed in Afghanistan. But, the most chilling Bush administration security policy was its illegal eavesdropping on mobile phone calls made overseas. Yet, in the late stages of the campaign, Senator Obama voted for the bill that essentially retroactively endorsed that policy, gutted the authority of the FISA court and gave the federal government a longer time limit to eavesdrop on someone without a warrant. Now his administration happily uses this authority to "keep us safe." Senator Obama said he would not support the bill if it granted immunity for telecom companies that assisted the Bush administration in their illegal eavesdropping. The bill did grant such immunity and Senator Obama still voted for it (see the following article for a nice discussion of the new FISA law: http://www.slate.com/id/2194254/pagenum/all/ ).
The Bush 43 administration was a serious threat to the liberty of American citizens. It grew the size and scope of government at an alarming rate, it usurped the authority of state governments, it amassed debt that our descendants will never be able to repay, it made a mockery of private ownership when it bought large portions of the financial sector, it went to war without a declaration from congress and defined the war in open-ended way to seize war powers indefinitely, it detained people without charges, and it illegally eavesdropped. In November 2006 and November 2008, the American people said, "enough," and ousted Republicans from both the legislative and executive branches of government. Presumably these voters wanted, "change." Presumably these voters wanted Bush policies to end. Presumably these voters did not want a President who would essentially represent a "Bush third term." The irony is, a Bush third term is exactly what the voters got. Under President Obama, questionable detentions and increased government eavesdropping will continue, foreign adventurism will continue, new health care entitlements will be created, runaway spending will continue, socialization of the financial industry will continue. In no substantial way are the policies of the Obama administration different from those of the Bush administration (oh, except for a few federal dollars for embryonic stem cell research, hurray change!). I am reminded of Walter Mondale's reference to a popular TV commercial of the mid 1980's when he challenged the lack of substance to Gary Hart's, "new ideas." For all the President Obama's talk about change we can believe in, "where's the beef?"
On Libertarianism, Part 2
Pragmaticus argues for more federal regulation of the economy because, he concludes, people are too irresponsible to self-regulate. He gives Barry Madoff, predatory lenders, people who borrowed beyond their means, and CEOs with golden parachutes as examples. Publius responds:
As far as regulation goes, I have never argued that there shouldn't be any. In fact, I have been quite clear that government has an important regulatory role to play and I was quite specific about what I thought it should be (http://freemarkets-freeminds-freesociety.blogspot.com/2008/08/on-libertarianism.html). Madoff violated EXISTING laws and regulations, did he not? In the housing crisis, federal regulators BLOCKED state efforts to curtail subprime lending (http://www.slate.com/id/2182709/pagenum/all). The Fed was irresponsibly slashing interest rates to below the inflation rate. So you can put faith in regulators, but quis custodiet ipsos custodes? (who will guard the guards? or in this case, who will regulate the regulators?). I agree that people will act irrationally, but the way markets work is that people who make irrational or unwise decisions pay a price and learn and the markets correct. Most of the time, just the individuals involved pay the price - but when government acts irresponsibly, as Fannie, Freddie, and the Fed did; we all pay the price. What you can't do, if markets are going to work, is remove what is called moral hazard (or as Newt Gingrich said, you can't have capitalism on the way up and socialism on way down). Yet, what are we doing? All these people did act irresponsibly - some at the prodding of the feds, many others not - and we are bailing them out! How can a market self-regulate if no one pays the price for their bad decisions? It can't, it's the loss that corrects the market. What will these bailouts accomplish? Not much other than delay a market correction that still has to happen eventually.
Finally, I can't believe any rational person would look at the behaviour of Wall Street, and the bankers, and the house poor borrowers and conclude that the solution to irresponsible financial behaviour is regulation by a government that acts even MORE irresponsibly. It is laughable to call Madoff the biggest Ponzi scheme of all time. The United States Federal Government is the biggest Ponzi scheme of all time. Since World War II, with a a few anomalous years under Nixon and Clinton (interestingly both times when control of government was divided between the two parties), our government has done nothing but spend, and spend, and spend, and amass debt that it never intends to repay (and probably never can). Yet, investors, particularly foreign ones, continue to finance it by buying our bonds - why? Because the government has a continually renewing source of revenue - the annual income tax - which brings in the new money each year to pay the interest on those bonds, making them still a good investment even though the principle cannot be repaid. That is exactly how Ponzi schemes work - the revenue collected from new investors is used to pay the profits of the old ones and it can continue ad infinitum as long as their is a stream of new investors. Madoff got caught because no one wanted to invest anymore when the economy went south. Well, when you have taxpayers instead of investors it can and will go on and on until it finally reaches the day of reckoning - when interest on the debt commands such large share of the federal budget that the tax revenue can no longer pay it and all the entitlement spending we have committed ourselves to (Medicare, Social Security, Medicare Rx, and soon national health care). You think the solution to Madoffs in the marketplace is these Ubermadoffs in Washington? This new irresponsibility knows no partisanship - both parties do it - and the current administration seems poised to do it bigger and grander than anyone. It simply has to stop. Our long term survival as the most prosperous country on the planet depends on it. I am not sure government can get smaller, but it at the very least NEEDS to stop growing. The irresponsible in the private sector are a fraction of the population (albeit probably a majority). The irresponsible in Washington are everyone - except Ron Paul, and sometimes John McCain.
What about the federal government gives you such confidence? The stellar way it manages Amtrak (which is far more expensive than flying, which the feds don't manage)? The stellar way it delivers the mail (which Fed Ex, DHL, and UPS do better but are prevented by law from delivering letters and may only deliver packages)? The stellar success of the ethanol industry - a government created, subsidized, and protected industry that continues to lose money? The fantastic job the government has done managing the war in Iraq or the aftermath of Katrina? The way the Fed devalued the dollar with low interest rates? In what way has the federal government inspired your confidence that increasing it's control over business and industry would be successful, or even better? Its success rate when it has tried is abysmal.
As far as regulation goes, I have never argued that there shouldn't be any. In fact, I have been quite clear that government has an important regulatory role to play and I was quite specific about what I thought it should be (http://freemarkets-freeminds-freesociety.blogspot.com/2008/08/on-libertarianism.html). Madoff violated EXISTING laws and regulations, did he not? In the housing crisis, federal regulators BLOCKED state efforts to curtail subprime lending (http://www.slate.com/id/2182709/pagenum/all). The Fed was irresponsibly slashing interest rates to below the inflation rate. So you can put faith in regulators, but quis custodiet ipsos custodes? (who will guard the guards? or in this case, who will regulate the regulators?). I agree that people will act irrationally, but the way markets work is that people who make irrational or unwise decisions pay a price and learn and the markets correct. Most of the time, just the individuals involved pay the price - but when government acts irresponsibly, as Fannie, Freddie, and the Fed did; we all pay the price. What you can't do, if markets are going to work, is remove what is called moral hazard (or as Newt Gingrich said, you can't have capitalism on the way up and socialism on way down). Yet, what are we doing? All these people did act irresponsibly - some at the prodding of the feds, many others not - and we are bailing them out! How can a market self-regulate if no one pays the price for their bad decisions? It can't, it's the loss that corrects the market. What will these bailouts accomplish? Not much other than delay a market correction that still has to happen eventually.
Finally, I can't believe any rational person would look at the behaviour of Wall Street, and the bankers, and the house poor borrowers and conclude that the solution to irresponsible financial behaviour is regulation by a government that acts even MORE irresponsibly. It is laughable to call Madoff the biggest Ponzi scheme of all time. The United States Federal Government is the biggest Ponzi scheme of all time. Since World War II, with a a few anomalous years under Nixon and Clinton (interestingly both times when control of government was divided between the two parties), our government has done nothing but spend, and spend, and spend, and amass debt that it never intends to repay (and probably never can). Yet, investors, particularly foreign ones, continue to finance it by buying our bonds - why? Because the government has a continually renewing source of revenue - the annual income tax - which brings in the new money each year to pay the interest on those bonds, making them still a good investment even though the principle cannot be repaid. That is exactly how Ponzi schemes work - the revenue collected from new investors is used to pay the profits of the old ones and it can continue ad infinitum as long as their is a stream of new investors. Madoff got caught because no one wanted to invest anymore when the economy went south. Well, when you have taxpayers instead of investors it can and will go on and on until it finally reaches the day of reckoning - when interest on the debt commands such large share of the federal budget that the tax revenue can no longer pay it and all the entitlement spending we have committed ourselves to (Medicare, Social Security, Medicare Rx, and soon national health care). You think the solution to Madoffs in the marketplace is these Ubermadoffs in Washington? This new irresponsibility knows no partisanship - both parties do it - and the current administration seems poised to do it bigger and grander than anyone. It simply has to stop. Our long term survival as the most prosperous country on the planet depends on it. I am not sure government can get smaller, but it at the very least NEEDS to stop growing. The irresponsible in the private sector are a fraction of the population (albeit probably a majority). The irresponsible in Washington are everyone - except Ron Paul, and sometimes John McCain.
What about the federal government gives you such confidence? The stellar way it manages Amtrak (which is far more expensive than flying, which the feds don't manage)? The stellar way it delivers the mail (which Fed Ex, DHL, and UPS do better but are prevented by law from delivering letters and may only deliver packages)? The stellar success of the ethanol industry - a government created, subsidized, and protected industry that continues to lose money? The fantastic job the government has done managing the war in Iraq or the aftermath of Katrina? The way the Fed devalued the dollar with low interest rates? In what way has the federal government inspired your confidence that increasing it's control over business and industry would be successful, or even better? Its success rate when it has tried is abysmal.
Saturday, February 14, 2009
Why I Hate Presidents Day
This coming Monday (February 16, 2009) is Presidents Day. This is the federal holiday that honours George Washington (born February 22) and Abraham Lincoln (born February 12).
Certainly these two men are worthy of remembrance. Washington was instrumental in the founding of this nation. The independence declared by Adams and Jefferson meant little if not defended in the field by Washington. Washington's prowess as a general may be debatable, but he indisputably accompolished an amazing feat. Largely through force of will; he was able to keep a small rag-tag army in the field against what could only be described as the super power of the 18th century; maintain morale; and prevail despite shortages of food, clothing, weapons, and other equipment. Under our current Constitution, Washington was the first President of the United States. But more than being first, Washington set an example for the others to follow. Washington's example is his great gift to our nation. In the history of mankind, generals who lead revolutions usually seize power (Caesar, Napoleon). After victory at Yorktown, Washington resigned his commission, disbanded his army, acknowledged the political supremacy of the Continental Congress and went home to Mount Vernon. For this, King George III called him, "the greatest man in the world." The American Revolution was fought for the principle that no one man should rule with absolute power. Washington could have destroyed that principle and ruled as a popular, perhaps even just, king, but he did not. After the Constitution was ratified, Washington was concerned about the powers invested in the Presidency and therefore limited himself to two terms. Again, he voluntarily relinquished power that no one would have begrudged him. In so doing, he set a precendent that every future President followed until FDR. Regardless of whether or not you believe FDR's legacy is a positive one, certainly a number of his supporters must have taken pause at his virtual lock on the Presidency because after FDR the Constitution was ammended to enshrine Washington's wisdom into law and limit Presidents to two terms.
Lincoln was arguably the most able President in the history of this country. No President has been handled a greater challenge than civil war. Lincoln's courage and fortitude held this nation together. His actions are not without controversy. His means may have been, at times, questionable. But, his legacy is a United States that remained united and whole and cleansed of the stain of slavery. Emancipation set the ground work for people of colour ultimately to share in the Jeffersonian ideal that all are created equal.
Why then do I hate Presidents Day? When I was a child, the holidays were separate: Washington's birthday and Lincoln's birthday. I can understand the desire to consolidate the two rather than have two holidays so close together, but the problem I have with President's Day is that in renaming it, the great legacy bestowed on our country by these two men gets lost. It should be a day for remembering the great gifts of Washington and Lincoln to our nation, not a day for buying cheap mattresses. Invariably, use of the term Presidents Day conjures up images of Mount Rushmore and other Presidents. We as a nation should be grateful for the contributions of Washington and Lincoln, not reminded of the irrelevance of Millard Fillmore, the corruption of Richard Nixon, the lechery of Bill Clinton, or the incompetence of George W. Bush. If it has to be one holiday, why not Washington-Lincoln Day, instead of Presidents Day?
Certainly these two men are worthy of remembrance. Washington was instrumental in the founding of this nation. The independence declared by Adams and Jefferson meant little if not defended in the field by Washington. Washington's prowess as a general may be debatable, but he indisputably accompolished an amazing feat. Largely through force of will; he was able to keep a small rag-tag army in the field against what could only be described as the super power of the 18th century; maintain morale; and prevail despite shortages of food, clothing, weapons, and other equipment. Under our current Constitution, Washington was the first President of the United States. But more than being first, Washington set an example for the others to follow. Washington's example is his great gift to our nation. In the history of mankind, generals who lead revolutions usually seize power (Caesar, Napoleon). After victory at Yorktown, Washington resigned his commission, disbanded his army, acknowledged the political supremacy of the Continental Congress and went home to Mount Vernon. For this, King George III called him, "the greatest man in the world." The American Revolution was fought for the principle that no one man should rule with absolute power. Washington could have destroyed that principle and ruled as a popular, perhaps even just, king, but he did not. After the Constitution was ratified, Washington was concerned about the powers invested in the Presidency and therefore limited himself to two terms. Again, he voluntarily relinquished power that no one would have begrudged him. In so doing, he set a precendent that every future President followed until FDR. Regardless of whether or not you believe FDR's legacy is a positive one, certainly a number of his supporters must have taken pause at his virtual lock on the Presidency because after FDR the Constitution was ammended to enshrine Washington's wisdom into law and limit Presidents to two terms.
Lincoln was arguably the most able President in the history of this country. No President has been handled a greater challenge than civil war. Lincoln's courage and fortitude held this nation together. His actions are not without controversy. His means may have been, at times, questionable. But, his legacy is a United States that remained united and whole and cleansed of the stain of slavery. Emancipation set the ground work for people of colour ultimately to share in the Jeffersonian ideal that all are created equal.
Why then do I hate Presidents Day? When I was a child, the holidays were separate: Washington's birthday and Lincoln's birthday. I can understand the desire to consolidate the two rather than have two holidays so close together, but the problem I have with President's Day is that in renaming it, the great legacy bestowed on our country by these two men gets lost. It should be a day for remembering the great gifts of Washington and Lincoln to our nation, not a day for buying cheap mattresses. Invariably, use of the term Presidents Day conjures up images of Mount Rushmore and other Presidents. We as a nation should be grateful for the contributions of Washington and Lincoln, not reminded of the irrelevance of Millard Fillmore, the corruption of Richard Nixon, the lechery of Bill Clinton, or the incompetence of George W. Bush. If it has to be one holiday, why not Washington-Lincoln Day, instead of Presidents Day?
Monday, February 9, 2009
Trade
We are in difficult economic times. The collapse of the housing bubble has had repercussions in other aspects of the economy. Banks, faced with default mortgages, are now unwilling to lend. With capital frozen, business cannot expand or grow. Hiring freezes, and employees are let go to cut costs. In this climate, everyone looks to government to create jobs and protect jobs. Populism and protectionism become popular.
This is evident in the creation of the current economic stimulus package that is being debated on Capitol Hill. The House and the Senate have passed two different bills, which must be resolved in conference committee. The House version contains, “Buy American,” clauses to insure that the government money spent will go to American businesses, buy only American products and, “protect,” American jobs.
It is easy to understand why such measures might be popular in these economic times, but they are extremely short sighted. No one makes an effective argument for truly free trade. Trade proponents argue that it creates jobs, opponents point to the jobs lost. The truth is, in any free and competitive market there will be winners and losers. This gives each side examples to point to, but confuses the public at large that is trying to decide, on balance, whether open trade or protectionism would be better.
However, these, “practical,” arguments about whether free trade costs or creates jobs miss the larger moral issue at stake. What defines a free society is freedom of choice. Our Constitution enshrines some freedom of choice in the First Amendment – our government is not allowed to dictate what you can say (or think), cannot prevent you from assembling peacefully, and cannot tell you what to believe or what god to worship. True liberty, however, requires that this freedom of choice extend to economic activity as well. What empowers consumers is having multiple businesses providing goods and services competing for the consumers' business. The consumer then can choose amongst various options the product he or she judges is of reasonable quality and/or a reasonable price. Monopolies or trusts exploit the consumer by denying choice and either force the consumer to accept inferior quality or charge the consumer exorbitant prices. The competition of a free market prevents this economic exploitation.
Protectionism similarly exploits consumers. Freedom and both political and economic power are maximized when the consumer has more choice. Limiting access to foreign goods, or subsidizing domestic ones, or inflating the prices of imports through tariffs, limits choice and forces the consumer to accept higher prices than the market would otherwise bear. What helps a narrow segment of the population (those that work in the industry being protected) exploits everyone who consumes goods and services and hurts us all. Economic freedom of choice is so crucial to liberty that, in the same sentence of the Declaration of Independence that charges King George III with the tyranny of taxing the colonies without representation, Jefferson also labelled George III a tyrant, “for cutting off our trade with all parts of the world.” It is no less exploitive to restrict consumer’s access to the fullest selection of goods and services today through trade barriers as it was in Mr. Jefferson’s day or when the lord of the manor would insist that all his serfs use the lord's mill exclusively.
Furthermore, economic protectionism is no longer practical in the 21st century. The world and the U.S. economy have changed over the last century. The airplane, the telephone, the cellular phone, the computer, the internet, and broad-band internet access have made the world smaller. The world is now, to borrow Tom Friedman’s phrase, flat. It is now much easier to market goods and services to all parts of the globe, buy from and sell to all parts of the globe, and collaborate with others in every corner of the world. These technological innovations make it impossible to build a wall around fortress America and remain internally self-sufficient. As developing countries can manufacture simpler things less expensively, our economic growth depends on being a center of innovation for the new goods and services of tomorrow. We cannot continue to do that unless we take advantage of the same tools – a worldwide talent pool and the ability to maximize profit by outsourcing tasks that others do better or less expensively – as our competitors will. The truth is, we have no business manufacturing something if we can’t make it better or cheaper and we will need to have open access the world’s resources if we are to continue to innovate. This means our workforce will have to have more flexible skill sets and gone are the days where working on the same assembly line provides a lifetime of job security. This is neither bad nor good, it simply is. Our policies must reflect this reality and trying to protect the industries of the 20th century, burying our heads in the sand, will lead to a long-term lack of competitiveness that stunts our economic growth and allows competitors to pass us by. Buy American provisions will simply encourage others to close their markets to our goods and services and lead to escalating trade wars that will deprive us of the competitive advantages and opportunities of full participation in the global marketplace.
The Buy American provisions in the economic stimulus package are a poison pill that threatens our liberty and long-term economic prosperity. President Obama has voiced his disapproval of these provisions, but if they remain in the final bill, they will prove and interesting test of the new President’s leadership. If such provisions are in the final bill, President Obama should veto it. President Clinton took on elements in his own party when he promoted NAFTA, can President Obama do the same? If these provisions are in the final bill, will President Obama have the political courage to veto a stimulus package that most of the country believes we need in the face of the economic crisis and ask Congress for a new bill without these provisions? I, for one, certainly hope so.
This is evident in the creation of the current economic stimulus package that is being debated on Capitol Hill. The House and the Senate have passed two different bills, which must be resolved in conference committee. The House version contains, “Buy American,” clauses to insure that the government money spent will go to American businesses, buy only American products and, “protect,” American jobs.
It is easy to understand why such measures might be popular in these economic times, but they are extremely short sighted. No one makes an effective argument for truly free trade. Trade proponents argue that it creates jobs, opponents point to the jobs lost. The truth is, in any free and competitive market there will be winners and losers. This gives each side examples to point to, but confuses the public at large that is trying to decide, on balance, whether open trade or protectionism would be better.
However, these, “practical,” arguments about whether free trade costs or creates jobs miss the larger moral issue at stake. What defines a free society is freedom of choice. Our Constitution enshrines some freedom of choice in the First Amendment – our government is not allowed to dictate what you can say (or think), cannot prevent you from assembling peacefully, and cannot tell you what to believe or what god to worship. True liberty, however, requires that this freedom of choice extend to economic activity as well. What empowers consumers is having multiple businesses providing goods and services competing for the consumers' business. The consumer then can choose amongst various options the product he or she judges is of reasonable quality and/or a reasonable price. Monopolies or trusts exploit the consumer by denying choice and either force the consumer to accept inferior quality or charge the consumer exorbitant prices. The competition of a free market prevents this economic exploitation.
Protectionism similarly exploits consumers. Freedom and both political and economic power are maximized when the consumer has more choice. Limiting access to foreign goods, or subsidizing domestic ones, or inflating the prices of imports through tariffs, limits choice and forces the consumer to accept higher prices than the market would otherwise bear. What helps a narrow segment of the population (those that work in the industry being protected) exploits everyone who consumes goods and services and hurts us all. Economic freedom of choice is so crucial to liberty that, in the same sentence of the Declaration of Independence that charges King George III with the tyranny of taxing the colonies without representation, Jefferson also labelled George III a tyrant, “for cutting off our trade with all parts of the world.” It is no less exploitive to restrict consumer’s access to the fullest selection of goods and services today through trade barriers as it was in Mr. Jefferson’s day or when the lord of the manor would insist that all his serfs use the lord's mill exclusively.
Furthermore, economic protectionism is no longer practical in the 21st century. The world and the U.S. economy have changed over the last century. The airplane, the telephone, the cellular phone, the computer, the internet, and broad-band internet access have made the world smaller. The world is now, to borrow Tom Friedman’s phrase, flat. It is now much easier to market goods and services to all parts of the globe, buy from and sell to all parts of the globe, and collaborate with others in every corner of the world. These technological innovations make it impossible to build a wall around fortress America and remain internally self-sufficient. As developing countries can manufacture simpler things less expensively, our economic growth depends on being a center of innovation for the new goods and services of tomorrow. We cannot continue to do that unless we take advantage of the same tools – a worldwide talent pool and the ability to maximize profit by outsourcing tasks that others do better or less expensively – as our competitors will. The truth is, we have no business manufacturing something if we can’t make it better or cheaper and we will need to have open access the world’s resources if we are to continue to innovate. This means our workforce will have to have more flexible skill sets and gone are the days where working on the same assembly line provides a lifetime of job security. This is neither bad nor good, it simply is. Our policies must reflect this reality and trying to protect the industries of the 20th century, burying our heads in the sand, will lead to a long-term lack of competitiveness that stunts our economic growth and allows competitors to pass us by. Buy American provisions will simply encourage others to close their markets to our goods and services and lead to escalating trade wars that will deprive us of the competitive advantages and opportunities of full participation in the global marketplace.
The Buy American provisions in the economic stimulus package are a poison pill that threatens our liberty and long-term economic prosperity. President Obama has voiced his disapproval of these provisions, but if they remain in the final bill, they will prove and interesting test of the new President’s leadership. If such provisions are in the final bill, President Obama should veto it. President Clinton took on elements in his own party when he promoted NAFTA, can President Obama do the same? If these provisions are in the final bill, will President Obama have the political courage to veto a stimulus package that most of the country believes we need in the face of the economic crisis and ask Congress for a new bill without these provisions? I, for one, certainly hope so.
Trade
We are in difficult economic times. The collapse of the housing bubble has had repercussions in other aspects of the economy. Banks, faced with default mortgages, are now unwilling to lend. With capital frozen, business cannot expand or grow. Hiring freezes, and employees are let go to cut costs. In this climate, everyone looks to government to create jobs and protect jobs. Populism and protectionism become popular.
This is evident in the creation of the current economic stimulus package that is being debated on Capitol Hill. The House and the Senate have passed to different bills, which must be resolved in conference committee. The House version contains, “Buy American,” clauses to insure that the government money spent will go to American businesses, buy only American products and, “protect,” American jobs.
It is easy to understand why such measures might be popular in these economic times, but they are extremely short sighted. No one makes an effective argument for truly free trade. Trade proponents argue that it creates jobs, opponents point to the jobs lost. The truth is, in any free and competitive market there will be winners and losers. This gives each side examples to point to, but confuses the public at large that is trying to decide, on balance, whether open trade or protectionism would be better.
However, these, “practical,” arguments about whether free trade costs or creates jobs miss the larger moral issue at stake. What defines a free society is freedom of choice. Our Constitution enshrines some freedom of choice in the First Amendment – our government is not allowed to dictate what you can say (or think), cannot prevent you from assembling peacefully, and cannot tell you what to believe or what god to worship. True liberty, however, requires that this freedom of choice extend to economic activity as well. What empowers consumers is having multiple businesses providing goods and services competing for the consumers business. The consumer then can choose amongst various options the product he or she judges is of reasonable quality and/or a reasonable price. Monopolies or trusts exploit the consumer by denying choice and either force the consumer to accept inferior quality or charge the consumer exorbitant prices. The competition of a free market prevents this economic exploitation.
Protectionism similarly exploits consumers. Freedom and both political and economic power are maximized when the consumer has more choice. By limiting access to foreign goods, or subsidizing domestic ones, or inflating the prices of imports through tariffs, limits choice and forces the consumer to accept higher prices than the market would otherwise bear. What helps a narrow segment of the population (those that work in the industry being protected) exploits everyone who consumes goods and services and hurts us all. Economic freedom of choice is so crucial to liberty that, in the same sentence of the Declaration of Independence that charges King George III with the tyranny of taxing the colonies without representation, he also labelled him a tyrant, “for cutting off our trade with all parts of the world.” It is no less exploitive to restrict consumer’s access to the fullest selection of goods and services today through trade barriers as it was in Mr. Jefferson’s day or when the lord of the manor would insist that all his serfs use his mill exclusively.
Furthermore, economic protectionism is no longer practical in the 21st century. The world and the U.S. economy have changed over the last century. The airplane, the telephone, the cellular phone, the computer, the internet, and broad-band internet access have made the world smaller. The world is now, to borrow Tom Friedman’s phrase, flat. It is now much easier to market goods and services to all parts of the globe, buy and sell to and from all parts of the globe, and collaborate with others in every corner of the world. These technological innovations make it impossible to build a wall around fortress America and remain internally self-sufficient. As developing countries can manufacture simpler things less expensively, our economic growth depends on being a center of innovation for the new goods and services of tomorrow. We cannot continue to do that unless we take advantage of the same tools – a worldwide talent pool and the ability to maximize profit by outsourcing tasks that others do better or less expensively – as our competitors will. The truth is, we have no business manufacturing something if we can’t make it better or cheaper and we will need to have open access the world’s resources if we are to continue to innovate. This means our workforce will have to have more flexible skill sets and gone are the days where working on the same assembly line provides a lifetime of job security. This is neither bad nor good, it simply is. Our policies must reflect this reality and trying to protect the industries of the 20th century, burying our heads in the sand, will lead to a long-term lack of competitiveness that stunts our economic growth and allows competitors to pass us buy. Buy American provisions will simply encourage others to close their markets to our goods and services and lead to escalating trade wars that will deprive us of the competitive advantages and opportunities of full participation in the global marketplace.
The Buy American provisions in the economic stimulus package are a poison pill that threatens our liberty and long-term economic prosperity. President Obama has voiced his disapproval of these provisions, but if they remain in the final bill, they will prove and interesting test of the new President’s leadership. If such provisions are in the final bill, President Obama should veto it. President Clinton took on elements in his own party when he promoted NAFTA, can President Obama do the same? If these provisions are in the final bill, will he have the political courage to veto a stimulus package that most of the country believes we need in the face of the economic crisis and ask Congress for a new bill without these provisions? I, for one, certainly hope so.
This is evident in the creation of the current economic stimulus package that is being debated on Capitol Hill. The House and the Senate have passed to different bills, which must be resolved in conference committee. The House version contains, “Buy American,” clauses to insure that the government money spent will go to American businesses, buy only American products and, “protect,” American jobs.
It is easy to understand why such measures might be popular in these economic times, but they are extremely short sighted. No one makes an effective argument for truly free trade. Trade proponents argue that it creates jobs, opponents point to the jobs lost. The truth is, in any free and competitive market there will be winners and losers. This gives each side examples to point to, but confuses the public at large that is trying to decide, on balance, whether open trade or protectionism would be better.
However, these, “practical,” arguments about whether free trade costs or creates jobs miss the larger moral issue at stake. What defines a free society is freedom of choice. Our Constitution enshrines some freedom of choice in the First Amendment – our government is not allowed to dictate what you can say (or think), cannot prevent you from assembling peacefully, and cannot tell you what to believe or what god to worship. True liberty, however, requires that this freedom of choice extend to economic activity as well. What empowers consumers is having multiple businesses providing goods and services competing for the consumers business. The consumer then can choose amongst various options the product he or she judges is of reasonable quality and/or a reasonable price. Monopolies or trusts exploit the consumer by denying choice and either force the consumer to accept inferior quality or charge the consumer exorbitant prices. The competition of a free market prevents this economic exploitation.
Protectionism similarly exploits consumers. Freedom and both political and economic power are maximized when the consumer has more choice. By limiting access to foreign goods, or subsidizing domestic ones, or inflating the prices of imports through tariffs, limits choice and forces the consumer to accept higher prices than the market would otherwise bear. What helps a narrow segment of the population (those that work in the industry being protected) exploits everyone who consumes goods and services and hurts us all. Economic freedom of choice is so crucial to liberty that, in the same sentence of the Declaration of Independence that charges King George III with the tyranny of taxing the colonies without representation, he also labelled him a tyrant, “for cutting off our trade with all parts of the world.” It is no less exploitive to restrict consumer’s access to the fullest selection of goods and services today through trade barriers as it was in Mr. Jefferson’s day or when the lord of the manor would insist that all his serfs use his mill exclusively.
Furthermore, economic protectionism is no longer practical in the 21st century. The world and the U.S. economy have changed over the last century. The airplane, the telephone, the cellular phone, the computer, the internet, and broad-band internet access have made the world smaller. The world is now, to borrow Tom Friedman’s phrase, flat. It is now much easier to market goods and services to all parts of the globe, buy and sell to and from all parts of the globe, and collaborate with others in every corner of the world. These technological innovations make it impossible to build a wall around fortress America and remain internally self-sufficient. As developing countries can manufacture simpler things less expensively, our economic growth depends on being a center of innovation for the new goods and services of tomorrow. We cannot continue to do that unless we take advantage of the same tools – a worldwide talent pool and the ability to maximize profit by outsourcing tasks that others do better or less expensively – as our competitors will. The truth is, we have no business manufacturing something if we can’t make it better or cheaper and we will need to have open access the world’s resources if we are to continue to innovate. This means our workforce will have to have more flexible skill sets and gone are the days where working on the same assembly line provides a lifetime of job security. This is neither bad nor good, it simply is. Our policies must reflect this reality and trying to protect the industries of the 20th century, burying our heads in the sand, will lead to a long-term lack of competitiveness that stunts our economic growth and allows competitors to pass us buy. Buy American provisions will simply encourage others to close their markets to our goods and services and lead to escalating trade wars that will deprive us of the competitive advantages and opportunities of full participation in the global marketplace.
The Buy American provisions in the economic stimulus package are a poison pill that threatens our liberty and long-term economic prosperity. President Obama has voiced his disapproval of these provisions, but if they remain in the final bill, they will prove and interesting test of the new President’s leadership. If such provisions are in the final bill, President Obama should veto it. President Clinton took on elements in his own party when he promoted NAFTA, can President Obama do the same? If these provisions are in the final bill, will he have the political courage to veto a stimulus package that most of the country believes we need in the face of the economic crisis and ask Congress for a new bill without these provisions? I, for one, certainly hope so.
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