Friday, September 4, 2009

Public Option Hopes Strong at DailyKos

DailyKos has a poll showing the public option still popular. Couple of points, though.

First, the poll question is: "Do you favor or oppose creating a government-administered health insurance option that anyone can purchase to compete with private insurance plans?" Careful wording no doubt helps the poll result. It isn't government run, it's government "administered". And it merely "competes" with private plans, it doesn't set costs or undercut them.

Second, Kos' comment feeds the confusion:

Seems like people like the idea of competition in the insurance market, that would help lower premiums and keep currently unaccountable insurance companies honest.

Hey, that does sound good! Let's think this through, though. Suppose we have a bunch of chair manufacturers, and people complaining about the high cost of chairs. The government creates a publicly run company to "control costs", and to "compete" in the marketplace. How does it do this?

One way would be for the public company - call it "Fanny" Mae - to be a much more efficient producer of chairs, offer better chairs at lower cost, etc., and actually win in the marketplace, driving some of the less-efficient competitors out of business. That's the way Kos seems to think would probably happen. What would actually happen, though, is that Fanny Mae would be less efficient than the private companies. It would produce expensive, poorly made chairs. Once sales turned out to be disappointing, the government would start subsidizing them, or "controlling costs" by dictating prices of raw materials or labor.

It might even "work", sort of, in that the retail cost of chairs might come down. But only at the price of all the subsidies, market distortions, etc. necessary to make it happen. Other private industries would be unwittingly affected, positively or negatively: table manufacturers might be helped by price controls on wood; wood-producers would conversely be harmed. Taxes would have to be directed to pay the subsidies. Meanwhile, many of the chair manufacturers that were competing just fine beforehand would go out of business, and the ones that managed to limp along would constantly be subject to the danger of Fanny undercutting them yet more (and thus would have a difficult time obtaining capital for growth).

That must sound like heaven to Kos. God forbid those chair manufacturers be "unaccountable" (except, oh yeah, to their customers).

But getting back to health insurance, Kos is actually fairly on target with the diagnosis. It's the prescription that's off. Health insurance companies are not as accountable to their real customers - that is, us, the ones covered by insurance - as they should be. But the reason for this is obvious: from their point of view, their customers are our employers. The market is already distorted by the misguided idea of allowing companies to provide health benefits tax-free.

At the time, guess what the purpose of this was? Competition, of course! It was wartime, and to control costs (does that sound familiar) the government was preventing war industries from competing for labor by raising wages. People didn't like that, so instead of wisely getting rid of wage controls, the government allowed this special tax treatment so that companies could compete anyway, just not directly on wages. (This reminds me of a Jay Nordlinger story recently, in which the principal trumpet of La Scala was paid the same monthly wage as any second violinist because the Communist-leaning government at the time would not allow wage disparity. But the trumpeter got eighteen months of wages per year, as a reward for seniority. Proving, yet again, that the Left understand incentives just fine. They're seeking power, not social "justice". When push comes to shove, they do what's necessary to maintain power.)

So to recap: the government was restricting competition (on wages), so they created a loophole to restore some competition (on health benefits). Now Kos (and, of course, much of the Left) has noticed that there's a problem. They want to tweak the competitive juices again by creating the "public option." If the government were running the Olympics, all the sprinters would have their shoes tied together before each race, to prevent unfair advantages. All in the name of "competition". And it would be hard to deny, after a hobbled Usain Bolt beat a hobbled Tyson Gay at the tape in the 100m dash, that the race was exciting. Except maybe by those who noticed that it took them thirty seconds to struggle to the finish.

Once that problem was brought to light, the government solution no doubt would be to enter a publicly-sponsored racehorse. You know, to promote competition.

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