10.01.2008 0

Raising the Flag of Free Enterprise

  • On: 10/02/2008 16:48:06
  • In: Health Care
  • Republican presidential candidate John McCain came out earlier this week with yet another proposal to help treat the country’s much-ballyhooed health-care crisis. Last month, you may recall, the putative nominee proposed encouraging states to allow residents more leeway in purchasing insurance plans from out-of-state providers who may offer more economic coverage.

    So far, so good. Last month’s McCain proposal was quick, easy, and economical. And it drew the plaudits of ALG News. But, not so with this week’s. While the new McCain proposal doesn’t even touch the hem of the Clinton-Obama national health-care garments, it comes dangerously close to exhibiting the same overarching extravagance.

    Unveiling his “Guaranteed Action Plan” at a University of Florida photo op, Mr. McCain proposed authorizing the federal government to assist states in setting up “non-profit pools” to help cover uninsured Americans. The Senator’s health-policy experts have set the ballpark price at $7 billion a year.

    As with most massive new federal programs, however, taxpayers can expect this one to be knocked well out of the park. Time and again. Already, Douglas Holtz-Eakin, a former Congressional Budget Office director, now a senior policy advisor to Mr. McCain, has warned, “If it turns out to be the case that one of the problems turns out to be not enough money, then [he’d] work with Congress to develop the funding in a sensible and responsible way.”

    The problem, of course, is that’s how it invariably “turns out.” Right from the outset, Mr. McCain’s “non-profit” solution has the same fatal flaw that besets every national health care plan announced by any of the current candidates: By definition, government funded non-profits don’t make a profit, which means they can’t be run on a profitable basis. And that means higher taxes.

    Ironically, the flaw in Mr. McCain’s ointment was incisively analyzed in an article from The Economist (hardly a beacon of fiscal restraint) as far back as 2004. Wrote the authors:

    “[L]ook to developing countries with massive inequality, such as Brazil. There, populist politicians trumpet extraordinarily generous public policies, such as an absolute guarantee that a necessity such as water must be free for the benefit of the poor. But guess what — without the benefit of an income stream, the public water companies cannot afford to expand the areas that receive that free public water by installing new pipes.

    “Public water is only available (surprise!) in politically powerful affluent and middle-income areas, where it is used as if it were free, which of course it is. Meanwhile the poor majority, living in the favelas, are forced to carry their buckets to private water sellers who charge vastly more than the public water system would have to, if it in fact charged. And yet any attempt to charge for water, and thereby have the revenues needed to extend public water service to the poor, is opposed on “populist” grounds by both the “struggling middle class” that already has the benefit of free water, and the private water sellers. This happens all over the developing world.”

    Well, the truth is: if the McCain-Obama-Clinton “non-profit” health-care solutions are allowed to metastasize, similar shortages (though not of water) may inevitably happen all over the developed world, as well. Revisit the operative sentence in that extraordinarily eye-opening analysis: “But guess what — without the benefit of an income stream, the public water companies cannot afford to expand the areas that receive that free public water by installing new pipes.”

    Simply put, there are no free lunches. Redistributing scarcity does not produce wealth. Last week’s McCain reform was a welcome step in the right direction. With this week’s proposal, the Senator is attempting to don the ill-fitting garb of those who, though not really doctors or economists, insist on playing both in the U.S. Senate. He would do far better to wrap himself in the flag of free enterprise.

    ALG CTA: In the coming months Mr. McCain is likely going to require a great amount of encouragement to keep from returning to his oft-repeated habit of wandering across The Aisle. The more the nation’s commentators can help wield him back at least to center stage, the better his chances of offering “healthy” opposition to the Obama-Clinton cadres.


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