Topic: Economics
The Real Problem with Socialized Health Care The Economics of Socialized Health Care.by Jeff Peters
(conservative)
Sunday, January 27, 2008
All Democratic presidential candidates have a special treat in store for those 47 million Americans without Health Insurance. If these Americans don't have health insurance or can't afford this service, Hillary Clinton, Barack Obama, and John Edwards, if any elected president, will try to establish socialized heath care.
Each candidate provided numbers for their packages. According to economic analysis these numbers matter none. If their numbers correctly reflect the true costs of this potential bureaucracy, it assumes that they will cap spending up to that point. Governments can cap spending, but these measures against inefficiency always fail. Political battles always erupt and eventually caps on spending increase. Therefore, caps never really cap spending as they always continue to rise from politicians seeking larger financial assistance for these programs. There always seems to be a problem, and money is needed to fix the "broken system."
Looking at the figure provided, there is a supply curve (aka marginal cost curve) and demand curve (aka marginal benefit curve). If legislation authorizes instituting socialized health care, then the government should cap spending at the point of efficient scale: where the marginal cost of an additional unit of healthcare service doesn't impede on the marginal benefit of an additional unit of healthcare provision.
If the assumption that governments can't really cap spending on bureaucracies is correct, then marginal cost or the supply curve will actually exceed efficient scale. The figure below marks this position as problem. Here, the marginal cost of an additional unit of healthcare service greatly exceeds the marginal benefit of an additional unit of provision. In other words, no one will pay attention to marginal cost, or just plain cost for that matter. Thus, deadweight losses (DWL) or social inefficiencies occur.
I suspect that the numbers provided by the candidates for their national healthcare spending programs are actually much more conservative than actual associated costs. There is no incentive to maintain true spending caps as government money is usually seen as free money by politicians.
Here is an important question: should this serve as a reason to not pursue such programs? The United States has achieved a remarkable standard of living with years of superb economic development and expansion. This leads me to believe that the current cost of putting together a national healthcare program is much smaller than if we did so in previous decades. It is probably small enough for me to believe that it doesn't really matter.
All in all, we face a trade-off between further improving our standard of living and instituting a bureaucracy that can shave off potential economic growth. We will have to increase government spending which will shave off some GDP. However, we probably can afford this cost to further economic expansion since we already enjoy a pretty high standard of living. A higher standard of living doesn't necessarily mean that people will become more happy!
Interesting Rebuttals:
If we start down this path of enormous spending, where does it end?
I believe we have a political system that would allow us to move in a different direction if we need to do so! The American people vote on the issues that are important to them. If they believe spending is a huge problem, they will vote for a candidate that will push them towards a direction that will control spending, thus inflation, and produce economic gains. Ronald Reagan's presidency became a reality when Jimmy Carter screwed up the economy with his huge spending programs. Democrats voted against usual democratic plans to get the economy back in shape. But for now, I think we are okay!
Actually, spending can be capped by having a Democrat as president with a Republican dominated congress.
I would concede to this point if Republicans acted like Republicans. Both Bushes, abandoned the core Republican philosophy of managed spending and balanced budgets. Looking to the arbitrary rhetoric of current presidential candidates I have much reason to believe a new base controls the Republican party. This may have been true in previous administrations. Good point by the way!
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Posted By: Walt Thiessen
Date: 2008-01-27 13:57:49
As usual, the conservatives demonstrate how completely they misunderstand the health care issue. Health care is not a failure of economics. Thus, there is no need for an economics solution to the problem. Rather, it is a failure of much too much government regulation, which has driven the cost of health care through the roof.
It is instructive to note that conservative health care socialism is very little different from liberal health care socialism. The only real difference (in a simplified sense) is that the conservatives want to put the insurance companies in charge of health care, while the liberals want to put government bureaucrats in charge, while neither side is willing to get the government out of the way and put the health care consumer (the patient) in charge.
By the way, your illustration is too large for the page, which is why you're getting a big white gap in the middle of the article on monitors measuring 1024x768 and smaller.
Posted By: Christopher Espinal
Date: 2008-01-27 14:10:17
Walt, I guess your right on the things you say about too much government. I'm not sure if you are just adding your own two cents.
However, I look at the problem that could arise if we have government controlled or "greed free" socialized medicine. You say, "Rather, it is a failure of much too much government regulation, which has driven the cost of health care through the roof." That is exactly what I'm showing here.
I explicity state that there are no such things as caps on spending, meaning too much of our money goes to these bureaucracies. Thus it drives the cost way up high as shown in the problem line in the diagram.
How could George W Bush have a balanced budget? The reason he had to spend so much is because of what Mr. Clinton did to the military in his 8 years. Speaking from experience, the Armed Forces through out all 4 branches were suffering because of cutbacks. Mr. Bush came in and had to mop up after Mr. Clinton, and not to mention the fact that there is a freaking war going on.
Posted By: Christopher Espinal
Date: 2008-02-13 23:31:05
I agree that the deficit will rise since there is a war. I'm not arguing against cutting spending on that. I am arguing that domestic spending MUST stop. Or the Republicans should serve as counter spenders!
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