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03.22.10

10 Reasons to Fear the Health-Care Bill

Democrats are patting themselves on the back for the House victory, but Richard Epstein says Obama’s childlike naïveté masks legislation that isn’t grounded in reality.

Will this attract Republican dollars, or will it backfire and rally liberals to these districts? Sarah Palin has published a list on Facebook of 20 Democratic representatives she wants conservatives to target in November. In order to qualify for Palin’s hit list, these Democrats had to vote “yes” on health care and also come from a district that the McCain-Palin ticket won in 2008.  We’re going to fire them and send them back to the private sector, which has been shrinking thanks to their destructive government-growing policies,” Palin threatens. She directs readers to her Web site, sarahpac.com, to donate to the cause. 

On Sunday, the House of Representatives passed a major new health-care initiative that has been hailed by the president and its many other supporters as an achievement that is parallel in magnitude and importance to Social Security in 1935 and Medicare in 1965. In one sense this comparison is all too apt. Both Social Security and Medicare have been deeply flawed from the outset, and their position grows more perilous with each passing day. Both systems have relied on the optimistic view that the growth in the underlying economy could fund their lavish provisions. Both have been constantly forced to increase their taxation base to make good on the ever-expanding set of benefits that Congress introduces on a piecemeal basis.

Supporters ignore the negative effect of this full array of taxation on the ability of the U.S. to attract and retain mobile capital that will see better opportunities for investment outside the borders.

One would have thought that the serious risk of social collapse in these programs would have led lawmakers to think hard about patching up the systems already in place before embarking on the bold enterprise to take on yet another program whose reach is equal to, or greater than, those that are already in place. But no, that did not come to pass. Idealism beat realism. The realists will, however, have the last laugh once the administration seeks to implement its proposals.

Why am I so sure that the new wave will fail? Most of it comes from the childlike innocence of President Obama as he starts to tick off the many ways in which this current package leads to sunshine in America. To listen to him speak, major health-care reform depends on only a few key variables:

1) More health care is better than less. Hence he can denounce nasty insurance companies for charging more money to people known to be high risk than to those who are not.

2) Obama can denounce anyone who thinks about the long-term stability of the health-care system as an evil “special interest” who does not understand how moral imperatives should drive a concrete political system.

3) The president can talk in woolly terms about how his vast new network of health-care exchanges will work, without bothering to ask whether or not the mandated set of benefits will price just about everyone out of the market before the program is put into place.

4) It is easy not to mention in the moment of celebration the complex network of taxes that promise to reduce the levels of our productive capacities in ways that make it more difficult to raise the funds needed to fuel this vast expansion of government services.

5) Supporters ignore the negative effect of this full array of taxation on the ability of the U.S. to attract and retain mobile capital that will see better opportunities for investment outside the borders.

6) It takes a special talent to ignore the risk that high systems of taxation will hinder job formation in the U.S., so that the 10 percent-unemployment levels will become the new norm rather than a dismal exception to traditional historical averages.

7) It is comforting to assume that the level of health in the U.S. is dependent exclusively on the amount of health care provided through the system, when the ability of people to keep out of the health-care system by having sound diets, good social lives, and productive jobs counts at least as much in the larger calculus.

8) In our moment of euphoria, we assume that the current health-care establishment can remain intact when the increase in regulation is likely to drive many older physicians, including those who work in primary care, into an early retirement rather than face the added regulations and reduced incomes that are likely to be their lot.

9) It is nice to avoid asking whether and how the current legislation allows for any price regulation to offset the anticipated price increases of the heavily subsidized prices of the large set of services that are mandated under the new law.

10) It is easy to treat as silly projections that the costs of these new entitlements will be kept to around $1 trillion when many key decisions on how this health-care program will operate will depend on key administrative decisions made by Obama operatives for whom cost control is the last thing on their mind.

Richard A. Epstein is the Peter and Kirsten Bedford Senior Fellow at Stanford’s Hoover Institution, the James Parker Hall Distinguished Service Professor at the University of Chicago, and a visiting Professor at New York University Law School.