Wednesday, May 18, 2011

CATO Institute Believes Freedom Comes In The Form Of Government Vouchers

This video from the CATO Institute supports Paul Ryan's Medicare voucher contraption.

It claims it will solve "both of the big problems created by Medicare", namely:
  1. it would protect taxpayers by putting a [GDP-growth constrained] limit on budgetary costs
  2. by giving beneficiaries control over their healthcare choices by "reducing" the destructive impact of third-party payer outcomes on the healthcare system
Is this supposed to be a joke?

The voucher system, being chained to GDP growth (+1%!), ensures that so long as the economy isn't officially in a recession (facing quarters of decline in GDP), spending on Medicare will increase over time, not decrease. What's more, because government spending is a component of GDP, and Medicare spending is a component of government spending, increasing Medicare spending over the years actually creates a positive feedback loop by "juicing" the GDP growth stat and ensuring that Medicare spending grows a little bit faster still.

Additionally, the voucher system does absolutely nothing to fix the agency problem inherent in a third-party payer system like Medicare. Whether a government bureaucrat makes the decision about what to spend money on and how much of it is to be spent, or the actual individual receiving the service, the economy of the choice being made is irrelevant when it is Other People's Money (OPM) that is being spent. The voucher system is a taxpayer-funded scheme, meaning the money being spent was never earned by the person spending it so they have no reason to be thrifty as it costs them nothing to spend it.

In fact, it's worse than that-- a voucher system is a "use it or lose it" system. You don't get to save the value of your voucher payments if you don't spend them, thus encouraging voucher users to spend wisely and only when necessary. If you don't spend the full value of your voucher, the excess value is gone. This is a strong incentive to maximize the amount spent per transaction.

This voucher proposal is a horrible scheme which will do absolutely nothing to solve the economic problems related to government intervention in the healthcare market. And that is without taking time to address the fact that this is a proposal which ultimately maintains the political system's control over the healthcare system and the voters' lives who are concerned about it. Like every "reform" proposal, this is a not-so-clever way of rearranging the way the government controls this aspect of the economy, not any kind of deregulation or gradualist plan for getting the government out entirely.

The only solution to the government healthcare debacle is complete and total withdrawal. If you want to discuss the merits of different political strategies for getting to that point they should all revolve around how soon you end further participation in such systems by current and future generations and what kind of payouts existing participants should expect to receive along the way.

Quit hacking at the branches. The CATO Institute demonstrates, yet again, why it is a complete disgrace and a nefarious libertarian doppelganger.


  1. Thanks for the excellent critical article. I am very tired of clever conservatives who come up with ways to use "market forces" to save destructive government programs. I also now think you were right about the Iraq war. I argued that there was a correct time to extricate the US from the Muslim world. It is now apparent that I was making a mistake: Everything that my enemy believes is wrong. This error is akin to "The enemy of my enemy is my friend." Actually, my enemy's enemy opposes my enemy because he wants to screw me over just as much as my enemy does. That's what they're fighting over. At this point there is little hope for a reasonable world short of the most radical remedies. All I would argue is that we be honest about the effects.

    For instance, you can't have decent affordable medical care without getting rid of drug laws and licensing of doctors. Not extending the US credit line might lead to certain dislocations: that might be true. However, where do you draw the line: At 15 trillion or do you wait until it is 25 trillion? Which is the better course: Stop now or wait until the situation is completely helpless?


  2. Hi Allen,

    Thanks for the comment. When you hear someone with a strategy for "improving" government or making government more "efficient" or more "sustainable", like the folks in the CATO video above, be wary.

    When the statists and socialists agree to these compromises, be worried. After all, why would they agree to one of these strategies if it ultimately resulted in the limiting or restraining of their power and influence over social outcomes?

    There is no way to make the government more like the market, just like there is no way to make oil more like water. They're principally different forms of matter, they aren't meant to go together. There's no way to "fix" government, government is doing just what it's supposed to and just what it's always done.

    Intellectually, emotionally, psychologically, society will have to move beyond government if we want the social ills related to government to go away. Other than that, it's hopeless, yes.

  3. Nice post Tbone. When are you going to drop some more knowledge on us?

  4. Anon,

    Depends on when I feel inspired enough to do so. Lately I've been a bit bored by some of this nonsense. But it's nearly certain that one day I'll wake up on the wrong side of the bed again and once I do, you can expect I'll stumble straight over to my keyboard and start tapping...