Sunday, March 28, 2010

Government hand crafts progressive fairy tales

Published in The Tennessean, March 28, 2010

Government hand crafts progressive fairy tales

by Richard J. Grant

In a world where the word "diversity" is uttered in tones normally reserved for worship, we might wonder why all truly meaningful signs of diversity are in retreat. We are told that we are to be color blind in our social relations, yet we are reminded in the new census forms, and in the plethora of affirmative action programs, of our government's obsession with race and gender. But shouldn't our government be less interested in race and gender than any one of us as an individual would be?

There was a time when diversity was more valued in human ideas and achievements, rather than in terms of those characteristics, such as gender and race, that are givens and that we would not likely change even if we could. Although many would object that we do indeed value new ideas and great achievements, the real trend of recent times is toward centralization of standards and regulations.

Just as every child is now at risk of getting a trophy just for showing up, each individual is now at risk of being given the necessities of life just for showing up. The word "risk" is not inappropriate here, for the risk lies in the deeper, real cost of living in this easy, homogenized world of contrived fairness and imagined social justice. The necessities of life don't just show up; someone must produce them.

That is the catch that lies at the heart of all our government entitlement and regulatory programs. They go way beyond the basic laws that better enable us to live and cooperate together. In fact, they generally counteract those rights with which citizens were "endowed by their Creator."

What does it mean, for example, for Congress to declare a "right to health care"? This is what we euphemistically call a "positive right" – the right to exercise power over others who have or produce something that we might want. And our new right is backed up by the threat of officially sanctioned coercion against those who do not conform.

Trained in medicine? We will now tell you how to conduct your practice, which facilities are available to you, and how much we will pay you. Your time is ours.

You run a hospital or an insurance company? We will now tell you what you must offer your customers, and then we will tell you how much you can charge them. We'll buy you off at first by sending a flood of customers your way, and for some of them we will even help pay their bills. But when it suits us, we will price you out of the market.

This is where progressive fairytales really begin. We find ourselves in a world of abundance and then assume that we can rearrange the distribution without diminishing the wealth. We tell insurers that they may not classify customers by risk, and then we wonder why everyone's premiums must go up or why real medical insurance just disappears. We treat doctors like glorified conscripts and then soon wonder why the best candidates for medical school choose other careers, and why we must import doctors from overseas.

Governments often cater to those who can't handle the fact that diversity in life means diversity in outcomes. The incessant drive towards equality in outcomes serves only to sacrifice the efforts of those who excel at production for the short-term benefit of those who excel only at consumption.

But it is worse than that. The coercion inherent in all government control, notably when such control exceeds that warranted by natural rights, sacrifices the dignity of all those who have something more than their appetites to offer. It is not charity. It treats producers like second-class citizens who, as if in payment for their virtues, must give up a commensurate portion of their lives in deference to the demands of those who lack such virtue.


Richard J. Grant is a professor of finance and economics at Lipscomb University and a scholar at the Tennessee Center for Policy Research. His column appears on Sundays. E-mail: rjg@richardjgrant.com

Copyright © Richard J Grant 2010

Sunday, March 21, 2010

Constitution was intended to protect citizens from harmful change

Published in The Tennessean, March 21, 2010

Constitution was intended to protect citizens from harmful change

by Richard J. Grant

The exceptional nature of the United States in world history is a reflection of the values and conservatism (in the sense of caution, not ideology) that were embedded by the framers in the Declaration of Independence and the Constitution. The intent, and for much of US history the result, was to protect Americans from a constitutional anarchy in which an individual's liberty is largely dependent on the arbitrary (and sometimes ephemeral) preferences of rulers, politicians, or even a voting majority.

In the Federalist No. 51, James Madison offered an explanation of the reasons for, and methods by which the Constitution would partition power and place the several constituent parts of the government in relation to each other such that they would be most likely to keep each other "in their proper places." Madison clearly states that the importance of this separation and relative independence of powers is found in the recognition that they are "essential to the preservation of liberty." The goal was the preservation of liberty for each individual in the United States.

The means of this preservation was devised in recognition of human nature. Americans, and particularly elected representatives, were to be set in constitutional relation to one another such that, "Ambition must be made to counteract ambition."

This was realism. The framers recognized that whatever idealism held the hearts of those who forged the new republic, not to mention those who merely acquiesced in the outcome, self-restraint would eventually yield to the instrumentalism of self-indulgence. The intentional alignment of the "interest of the man" with the "constitutional rights of the place" was recognized as a device "necessary to control the abuses of government."

The prescience of the framers, as embodied in their product, has been at war with human nature ever since. The framers’ fears are personified by those who exhibit the anti-constitutional mentality, that is, by those who see the Constitution as an obstacle to be circumvented rather than as a protector and moderator to be mutually embraced.

The ongoing clash of mentalities is well illustrated by recent maneuvers in Washington, DC. An attempt to bring sweeping changes to the regulation and provision of medical care has been met by an opposed array of institutions and interests, all of which were essentially predicted by Madison and the other framers.

In addition to the obvious separation of the branches of government, Madison also recognized the importance of "comprehending in the society so many separate descriptions of citizen as will render an unjust combination of the majority of the whole very improbable, if not impracticable." The Constitution was deliberately designed to divide and moderate the will of factions.

We see this today in the frustration of the faction that controls the executive branch and both houses of Congress. The constitutional role of the people, of individual citizens, is demonstrated in their influence on their representatives and the manner in which that serves to fragment the majority party.

The Constitution is designed to protect us from imposed change. It is one thing for individuals and their voluntary associations to experiment in their private activities and lifestyles. Others might learn from their successes and follies. But it is quite another thing to force a sweeping experiment upon the whole society.

This is why there has been such great opposition to attempts to impose greater government control over the provision of health care. But not only is it an attempt to impose an unnatural order on a vital human activity; it is a clear infringement on the people's liberty.

A constitutional attitude recognizes that it is easier to break things than to repair them. It places great stock in caution: it is better to delay the possibility of good change than to be trapped by expediency in bad change.

Ambition and the anti-constitutional attitude repeatedly face us with this question: Will we have rule of law or rule by men?


Richard J. Grant is a professor of finance and economics at Lipscomb University and a scholar at the Tennessee Center for Policy Research. His column appears on Sundays. E-mail: rjg@richardjgrant.com

Copyright © Richard J Grant 2010

Sunday, March 14, 2010

A health-care reform honeymoon won't last long

Published in The Tennessean, March 14, 2010

A health-care reform honeymoon won't last long

by Richard J. Grant

We're about to get a health-care wedgie. But at least we see the perpetrators coming; and most Americans don't like what they see.

As Democrats stalk us with the thin end of another wedge to drive more government interference into our health-care system, a majority of Americans remain firmly opposed. They know that wedges always get wider at the other end.

All government programs have a tendency to expand. Governments already control more than half the dollars spent on US medical care. Government regulations already restrict most of what doctors, hospitals, and insurance companies can do.

Apparently this is not working out well. But instead of reducing the dose, Democrats want to increase the level of government control and interference. Those with socialist eyes cannot see. Those with socialist hearts do not care.

Whether or not it is recognized, the biggest single reason for complaints about our current medical care system is the effects of government interference. When regulations cause problems, the first resort is too often to add more regulations. They put Band-Aids on Band-Aids until the political bands are too thick to dissolve.

It is well-known that the president's ultimate goal is a universal, single-payer health care system. Yet we are told that there will be no "public option" or government takeover. We are even told that the president's proposal, which is very similar to the Senate’s bill, will be self-funding. But this is nonsense, as pointed out by Rep. Paul Ryan of Wisconsin, the ranking Republican on the House Budget Committee, at the president's recent "summit on health care."

When the double counting is corrected, and the hidden "doc fix" expenditures are put back into the total, Rep. Ryan has found that "the full 10-year cost of the bill has a $460 billion deficit. The second 10-year cost of this bill has a $1.4 trillion deficit." He described the bill as being "full of gimmicks and smoke-and-mirrors." Rep. Ryan is a polite man.

Government interventionists almost always underestimate, or understate, the full cost of their proposals. And their programs, once implemented, tend to grow. Each succeeding political generation seems to need to up the ante to impress its supporters.

Tommy Douglas, who is considered to be the father of Canadian socialized medicine (and really was the grandfather of Kiefer Sutherland), was not so extreme as to believe that such a system could be 100 percent funded by taxes. He believed that a system of co-pay was necessary in order to maintain a link to personal responsibility, and to help prevent the costs from getting out of control. But within 20 years the federal government had created a single-payer system.

What happened in Canada, due to the mixture of "progressive" ideas and perennial political incentives, is now unfolding in the United States. In Canada, there was a honeymoon period lasting some three decades during which the relatively free Canadian economy subsidized the medical sector and consumed much of its previous medical capital. As problems became more visible, and people better understood the causes, political resistance began to grow.

The United States might also have a brief honeymoon, but it won't last long. We know what happened in Canada and elsewhere. Also, Canadians who need urgent care unavailable in Canada have the US as a nearby failsafe destination.

But as Obamacare unfolds, Americans will have no such convenient destination (and neither will Canadians). Other, more distant, countries will increasingly take on that role.

What the president and his congressional allies are attempting to force upon us will be restrictive and expensive. Sweet promises will quickly turn sour as incentives are distorted, innovation is misdirected, and personal responsibility is disconnected.

As free individuals, and as patients, we could deal directly with our doctors and get along just fine. But when a politician tries to put on the rubber glove, we know that what's coming cannot be good.


Richard J. Grant is a professor of finance and economics at Lipscomb University and a scholar at the Tennessee Center for Policy Research. His column appears on Sundays. E-mail: rjg@richardjgrant.com


Copyright © Richard J Grant 2010


Sunday, March 07, 2010

The marketplace relies on profit to reduce costs

Published in The Tennessean, March 7, 2010

The marketplace relies on profit to reduce costs

by Richard J. Grant

There is a moral asymmetry between the two main visions of the role of government in our lives. Those who favor the minimization of the state would not interfere with those who choose voluntarily to join a communal society within the larger society. But those who favor the maximization of the state would not reciprocate: They would not permit a free society within their larger society.

Statists just can't leave people to get on with their lives. They can't imagine civil society existing and prospering without extensive government control. This is what the rhetoric and policy proposals of the Obama administration are clearly telling us.

We learned early that the president does not understand the roles of profit and loss in our economic affairs. He seems to believe that profit is a burden that is best removed so that costs might be lower. He either doesn't understand or doesn't care that the possibility of profit is the best natural motivator toward greater efficiency in the use of resources, toward better stewardship. The profit motive does not increase costs; it reduces them.

The recent release of "The President's Proposal" on health care shows the breadth of the Obama administration’s confusion on economic matters. It speaks of improving individual responsibility, but then proposes an "income assessment" (a weasel word for "tax") on individuals who might choose not to purchase medical insurance.

Similarly, the proposal speaks of strengthening employer responsibility, but then imposes a tax on those employers that do not offer a government-approved form of medical insurance. Apparently, the administration believes that government knows better than the individuals involved when insurance "costs too much and covers too little."

A large part of the problem with medical insurance is that employer-provided plans are subsidized through tax deductibility. This makes medical care seem much less costly to the patient than it really is, and patients become less careful about the quantity and quality of care that they choose to purchase. It increases the demand and pushes up real costs.

But the president's proposal adds to this demand by offering tax credits toward the payment of medical insurance premiums. Increased demand will draw more resources into health care, thereby putting more upward pressure on costs. Although many individuals might see a lower visible price for their premiums, the actual resource cost will be higher. Someone will have to pay: Taxes will be extracted elsewhere.

Another provision would increase government spending on Medicare drug benefits. It would also spend further billions on community health centers in what are deemed to be underserved areas. All this comes with more regulation of rates and health-insurer practices. Who will regulate the regulators?

The administration seems to believe that imposing an excise tax on "high cost" health insurance plans will make the insurers more efficient. But all this interference will take choices away from consumers. If the administration were truly serious about efficiency, it would deregulate the medical and insurance industries. If the administration wonders why "insurers have little incentive to lower their premiums," then it should look at the ridiculously complex and irrational regulatory and tax structure that already exists. Reform should mean "repeal."

The president’s proposal to impose a Medicare tax surcharge on "unearned" income will increase the interest rates and dividends that companies must pay to attract investors. This will burden people of all income levels.

If the administration is serious about promoting competition then, once again, the answer is deregulation. If an industry is heavily regulated, it matters little how many companies are in an industry. Competition can be measured only by freedom of entry into (and exit from) the industry, and by the freedom to serve customers unencumbered by arbitrary, politicized regulators. Nothing works better to improve service than the fear of a competitor taking one's customers away.

The choice is always the same: submit to the statists or stand with the Constitution.


Richard J. Grant is a professor of finance and economics at Lipscomb University and a scholar at the Tennessee Center for Policy Research. His column appears on Sundays. E-mail: rjg@richardjgrant.com

Copyright © Richard J Grant 2010