The topic today is the business side of “health care reform.” Two online articles recently brought to my attention prompted these comments. One illustrates beautifully how government intervention in business distorts and suppresses competition, forces the taxpayer to foot the bill, and ensures that the product is terrible, usually for the consumer with the least market power. The other is a harbinger of the impact that dynamic will have on health care if the Democrats achieve their objective of controlling it completely.
The first piece is from June 2008 (H/t: Zombie Contentions). Binyamin Applebaum of the Boston Globe put together a painful narrative of developments with low-income housing in Barack Obama’s Illinois state senate district, and although it’s long, it makes a gripping read. I had been aware of much of the detail before reading Applebaum’s piece due to the hard work of journalists like Byron York. But seeing it all together in a single piece is what highlighted for me this truth:
Obama, as part of the Illinois/Chicago machine, exploited government policy on low-income housing to favor business cronies, and enrich them and the in-crowd politicians, at taxpayer expense.
In the hands of the Illinois machine, the original idea of compassion behind low-income housing was the remotest, slimmest pretext for what became and remained nothing but theft and bribery. We can be sure this is still the case, so I will switch to the present tense. Let me put it another way: we shouldn’t even call it a low-income housing program. It’s a crony-enrichment program. The taxpayers are paying for it. When they – and we, because federal funds come into this too – pay the taxes that are used in this program, the money is going into the pockets of favored businesses – which are often formed by political cronies solely for the purpose of raking in public funds from non-competitive contracts – and from there is redistributed in part to the politicians who arrange the contractual favors for them.
Many will say, “This is how politics works.” And to that I say, Exactly! That’s why the more we have government intervening in the commercial life of the people, the more of this there will be. Don’t blame the “businesses.” Government mandates create business opportunities that did not exist without them, and moreover create guaranteed income flows that true businesses, in a competitive business environment, would have no basis for expecting. Those income flows are extracted with a pole-axe from the taxpayers. Government intervention, meanwhile, suppresses, distorts, and even removes competition altogether.
Businesses don’t, on the whole, like competition. And get real: you don’t like it either, when it’s over your livelihood. It’s human nature to think a sinecure looks pretty good. That’s why there will always be a tension between the philosophy – backed by centuries of evidence – that a competitive business environment is better for everyone, and the search by individuals and companies for government-mandated advantages that suppress their competition.
It’s the people, in our political life as voters and citizens, who have to insist that such advantages be minimized at all times, and eliminated wherever possible. Businesses, acting as businesses, recognize that the costs of regulation, taxes, and fees may drive them under, but big businesses also see these measures as cost advantages for them over their smaller competitors. And there will always be businesses ready to participate in crony contracting schemes, which guarantee income from the taxpayer. Indeed, “businesses” magically spring up to participate in such schemes, created by and for the cronies themselves.
Are you getting this yet? Government mandates create guaranteed income flows, funded by you. The more mandates there are, the more you have to fork over. In Chicago, this dynamic has become so blatant that it has, today, only the most perfunctory cover from policy motivation. It isn’t about providing quality low-income housing: it’s about lining the pockets of a group of cronies.
The Applebaum article makes that clear. In Obama’s former district, only the most languid hand-wave has been made by the taxpayer-funded cronies at the putatively central business of providing habitable low-income housing. The housing is, in fact, ghastly, with non-working sewage and electric systems, dangerous structural inadequacies, and no interest at all from nominal property managers. Federal inspectors have shut the housing projects down, and the main result from that is that more taxpayer money goes to crony contractors to “fix” the situation. The government programs to provide low-income housing are effectively not programs to provide low-income housing, but to keep income flowing to the cronies of Illinois politicians.
So, to sum up, the original concept was to provide quality low-income housing, at taxpayer expense. Those who approved that purpose had in view habitable housing, in which poor people who can’t afford much could live in safety and a minimum level of comfort. The taxpayer has forked over, and a lot of money has gone, courtesy of lawmakers, to contractors in non-competitive processes. The resulting housing is not habitable, so the poor people don’t have what the taxpayer intended for them to have, and the taxpayer doesn’t have what he was supposed to get: poor people in better conditions, and the overall improvement in the community environment that is intended to result from that. But when the result is then determined to be inadequate, the remedy is to just take more money from the taxpayers and give it to more crony contractors.
With that in mind, we turn to the latest news from the hotly-disputed Senate race in Massachusetts, forwarded to his email list by GOP grassroots activist Steve Maloney of Pennsylvania. The Business Insider reports that health care lobbyists have opened their deep pockets to throw money at Martha Coakley, the standard-issue big-government Democrat running against Republican Scott Brown. The piece provides an informative name-by-name list. Says author Joe Wiesenthal:
Of course, this is how politics works. Lobbyists for various corporations and causes get involved wherever they can for candidates of both parties. But when you see all these big pharma (and insurance!) representatives coming with cash for a crucial vote, you know which side they’re on.
They’re on the side that proposes to guarantee income flows to them, through control of industry services, mandates on customers, and extractions from the taxpayer.
If the federal government – and indeed, state governments – controls how all of us “do” health care, we will have no option of consumer choice standing between us and a replica of the Chicago low-income housing situation. There will be no firewall protecting us against becoming like the poor of Chicago, in terms of our access to health care: that is, without the power of exercising competitive demand. But we will also be the taxpayers who are mugged over and over, to put money in the pockets of our politicians’ cronies in the health care industry.
The sordid history of crony contracting, pork-rolling, and kickbacks at the federal and state levels is all the evidence we need that temptation is never withstood, when government’s mandates create guaranteed income flows pried from the people’s wallets. It’s idiotic to posit that for some reason this wouldn’t happen in the health care industry. The remedy of wisdom and good government is to involve government less in managing and mandating the conditions of the economy. The less government intervention there is, the less urge and opportunity for the private sector to seek advantageous intervention. The more government intervention – the more such urges and opportunities.
Government is just other people, facing temptations. It’s also other people using power to create temptations. Ceding it more power never improves our conditions generally – it only improves the conditions of some at the expense of others. One other thing the Applebaum tale (and the many revelations about ACORN in 2009) demonstrates is that the moral quality of lobbyists who purport to speak for “the people” differs hardly at all from that of industry lobbyists. It is naïve and foolish to believe that community activists are interested in improving the quality of low-income housing. They are seeking to improve their own conditions at the expense of others. In too many cases, if there were actually better low-income housing, community activists would lose their “hook.”
No one who’s out there pestering government to enlarge its span of control is more interested in your health care than he is in improving his condition at your expense. In most cases, he doesn’t care at all about your health care. He cares about getting mandates in place that will regularly extract money from you, to his benefit.
The grown-up citizen’s way to deal with this is not to wail pointlessly about the inevitable human dynamic of rent-seeking. It’s to get government back under control, so that it’s not an effective method of rent-seeking for every profession, industry, and walk of life. That government really is best which governs least.