SCHIP Nonsense
Posted by
Kevin
This is a rather silly argument:
Maybe we should also make these people eligible for food stamps, housing subsidies, and free cigarettes. Why should anyone have to pay for anything anymore?
Come on, people! We’re talking about whether the government should pay for your two kids’ health insurance plans when you make more than $51,000 a year (more than the new national median income). I know that health insurance is not cheap, but neither are your mortgage and car insurance. You’re not going to ask the government to pay for those too, are you
We already do have subsidies for housing for some people in the middle class: it is called the mortgage interest deduction. In fact, a moments thought will show you that we subsidize quite a bit of middle class life. We do provide a kind of food subsidy: the cost of inspecting the food to make sure that it wont poison you is borne by the government. We subsidize the purchase of cars, sometimes directly through tax credits but more often through the road system. Highways and byways are paid for by the government and your car is essentially useless without them. We provide free education of or any child who wants it. That, too, is a subsidy of the middle class. We even subsidize health care: much of the important medicine we have today came as a result of NIH research.
We, as a society, have subsidized an enormous amount of modern life because, as a society, we have decided that it is immoral, inefficient, or impractical to leave those portions to individuals. Much of our lives are aided by government subsidies and we are better as a society and an economy for it. Arguing that middle class parents must, because they are middle class, pay for health insurance is exactly and precisely like arguing that middle class parents should pay for their own food inspection programs because they are middle class. Its a silly argument because it has nothing do with the actual reasons society subsidizes anything. If you don’t think arguments of morality or inefficiency or practicality — the arguments that have served as the basis for all good government interventions — then say so. But don’t pretend that the SCHIP expansion is somehow unique or that the government has not subsidized large swaths of American life or that those subsidies have had a positive effect on American society. Doing so just makes you look silly.
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Trackback 8/29/2007
As a matter of regulatory economics, it’s not really correct to think of roads or food inspection programs as a market “subsidy” — at least not as a subsidy for something that could otherwise efficiently be provided by markets.
Things like roads and food inspections are considered economic “public goods,” meaning that the are more or less non-rival in consumption and non-excludable. Non-rival in consumption means large numbers of people can consume the good without appreciably diminishing it, and non-excludable means it is impossible or very difficult to exclude people who haven’t paid for the good.
Food inspections, for example, are non-rival in consumption — whether 1 or 100 or 1000 people consume the inspected food, the inspection itself isn’t “consumed.” Likewise, food inspections are practially non-excludable — there’s no feasible way to exclude people who haven’t paid for the inspection from consuming the inspected food. The same is true for public roads. (Of course, a small group of consumers could secure a private food supply and private roads, but in that case we’d have an oligopolistic buyer cartel and not a true market to begin with).
When something has characteristics of a public good, it is usually inefficient to provide it through markets, because of the free rider problem. No producer will want to incur the costs of supplying a non-rival, non-excludable good because most rational users will use it without paying. Thus, generally speaking, public goods are most efficiently supplied by government or by collective action (i.e., through a commons).
The analogy of the SCHIP program to roads and food inspections, then, doesn’t necessarily hold. It isn’t so much a question of the government subsidizing the middle class versus subsidizing the poor, as it is a question of whether health care is best considered an economic public good or a commodity that is most efficiently supplied by markets. This question leads to a subsidiary question, which is the extent of any externalities even if health care can be supplied by markets.
IMHO, externalities are an enormous issue when it comes to free markets in health care. In any market, there is some demand that will not be met, because there are consumers at some points on the demand curve who cannot afford or are not willing to pay a price that is equal to the producer’s marginal cost. That might be ok if we are talking about something like designer clothing, because there are no significant negative externalities resulting from that unmet demand. With child health care, however, the unmet demand leads to other enormous social costs over the long term. The extent of these externalities — not to mention non-market ethical and distributional concerns — suggests that health care must be subsidized for some portion of the demand curve, or perhaps should be provisioned by government instead of markets. Of course, if health care is entirely provisioned by government, we’d have to deal with the negative externalities (fraud, waste, inefficiency, agency costs, etc.) resulting from that approach….
Comment 8/29/2007
Doperderck
Yes, you are right about how roads and food inspection is handled. That do not have to be handled that way, however; ask any libertarian and they can probably come up with ways to provide both services in an entirely private fashion. They would also argue that the market would take care of poised food or bad roads — people who stop patronizing those providers. So the government doesn’t need to provide either service.
So while you are undoubtedly correct that subsidy is not the proper economic term, I think that it carries an appropriate connotation. Public goods are, I think, just the most obviously appropriate for government to pay fr - -and when government pays for something they are, I think, subsidizing at least some of the people who use that thing.
Comment 8/29/2007
Excellent comment dopderderck.
Comment 8/29/2007
[…] Lean Left takes to task those that argue that a family making $51,000 should not under any circumstance have government assistance in paying for health insurance: We, as a society, have subsidized an enormous amount of modern life because, as a society, we have decided that it is immoral, inefficient, or impractical to leave those portions to individuals. Much of our lives are aided by government subsidies and we are better as a society and an economy for it. Arguing that middle class parents must, because they are middle class, pay for health insurance is exactly and precisely like arguing that middle class parents should pay for their own food inspection programs because they are middle class. Its a silly argument because it has nothing do with the actual reasons society subsidizes anything. If you don’t think arguments of morality or inefficiency or practicality — the arguments that have served as the basis for all good government interventions — then say so. But don’t pretend that the SCHIP expansion is somehow unique or that the government has not subsidized large swaths of American life or that those subsidies have had a positive effect on American society. Doing so just makes you look silly. Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages. […]
Pingback 8/29/2007
You’d also note that most of the folk who are against it merely because it’s a subsidy are also the sort who would get rid of public roads but recognize that there’s no chance in hell of it happening.
I think there are some places that it could benefit from (my daily commute includes a place or two where local businesses are trying to take over the road “improvement” because the local government version is moving so slowly it’s costing them business) as well as places where it’s less feasible, but that’s why I’m not a libertarian.
If you head to places like the middle southwest, there are actually a good number of privately owned roads, particularly around the ranches and rural areas in New Mexico and Texas, and public use is tied to tolls, agreements, and other solutions to the classical free rider problem. There are businesses which do their own food inspections voluntarily to levels far beyond that of any government costs (”organic” foods being the best known but not only), and can pass the costs onto the customers who can choose to go for the higher priced and higher inspections or not.
As an aside, the NIH is responsible for a mere 25% of biomedical research funding in the United States, and that’s ignoring the biotech industry’s hefty infrastructure investments. Simply letting the biotech industry keep the money with the limitation that they have to spend it on biotechnical research (a little fascist for my tastes, but stick with it as a mind game) would not only save the costs of IRS collection, but also the 10% of its funding that the NIH requires for administrative purposes.
Comment 8/29/2007
“the NIH is responsible for a mere 25% of biomedical research funding in the United States, and that’s ignoring the biotech industry’s hefty infrastructure investments. Simply letting the biotech industry keep the money with the limitation that they have to spend it on biotechnical research … would not only save the costs of IRS collection, but also the 10% of its funding that the NIH requires for administrative purposes.”
Seems to me the above statement assumes facts not yet placed into evidence (that funding distributed by NIH for biotech research is less than the tax revenues collected from the biotech industry).
It also ignores the grant process used by NIH to determine who gets money for what, as well as any data sharing requirements associated with work product from publicly-funded research.
There is an implicit assumption in the above that the most profitable biotech companies (the ones that would get the biggest tax break and thus have the most “public funding” to do research) are the ones that will do the best (and most appropriate research. There is plenty of evidence in US corporate history to suggest that companies with core competencies aligned with profitability (development, production, marketing, distribution) are not the best at research.
I also wonder how and who would quantify “the money” that is kept by each company (currently an IRS function) and then enforce the limitation that “the money” is spent on the appropriate research (currently an NIH admin function). Seems to me we will need to conjure up a couple more invisible hands before we can implement this one.
Comment 8/30/2007
Right, because there’s no way that they’d just put it in their pockets…
And, of course, making it a matter of legislature that they can’t do so is a little fascist for your tastes.
Also, as Ted stated, the grant process is also something of a safeguard, as it can offer as a tool to direct some research toward areas of dire global need, as opposed to simply the most profitable fields.
Comment 8/30/2007
It amazes me that the U.S.A. is having this kind of argument at this point in time. Incredible!
Wake up! All of the industrial world has had a Single-Payer Plan of medical care for ALL of its citizens for decades! Some have had that health care plan for over 50 years.
The U.S.A. is way behind on this one AND it is directly related to being way down the list on longevity. See the statistics. We are # 46.
We are stupid enough to allow corporations to focus on PROFITS…sometimes at the cost of LIVES, whereas “WE THE PEOPLE” should be focused on PREVENTION. We can keep tabs on a Single Payer more easily than we can on the fractured,zillion MisManaged Medical companies with their PROFIT vs PATIENT mess at every level.
Come on….enough of that verbiage…. Let’s get down to brass tacks. Do you want to lose your life, because they avoid doing tests, avoid antibiotics after major surgery,avoid doing treatments if they can sneak by without it….on & on!
Obviously, some of you have never had to face the reality of dealing with MisMANAGED CARE. If you don’t have medical knowledge AND the physical, mental stamina to fight for your medical rights and your life, most likely you’ll be a DEAD DUCK. I’ve been there THREE times. I KNOW.
STOP in your TRACKS:
Which is better PREVENTION or treatment of a MAJOR illness? Combining prevention with MisManaged Care is a major joke. NO such thing occurs. A Single Payer plan would have to focus on PREVENTION to save money. It is a win/win situation for both the patient and the government!!!
Fight for UNIVERSAL health care NOw. The life you save may be YOUR OWN.
Comment 9/2/2007