From the Heart
At a Democratic campaign dinner in Iowa last Friday, presidential hopeful Elizabeth Warren said (among many other things), “I'm running a campaign from the heart.” And that’s the problem. It takes more than heart or emotion to run a country.
America is a nation founded on reason, not heart. The heart is not only the seat of love and compassion, it is also the seat of jealousy and envy. As James Madison noted in Federalist No. 51, “It may be a reflection on human nature, that such devices (checks on the power of government) should be necessary to control the abuses of government ... If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.” In addition, Alexander Hamilton queried, “Why has government been instituted at all? Because the passions of man will not conform to the dictates of reason and justice without constraint.”
And the passions of Senator Warren’s heart will also not conform to the dictates of reason. Her anger at the wealthy goes beyond good governance. Bernie Sanders wants to eliminate billionaires because his Marxist ideology rejects all forms of wealth or profit. But Senator Warren is angry at billionaires. She believes that the billionaires and the large corporations have skewed the playing field to their advantage and that their vast profits are unjustified. And she is correct. The playing field is not level. It is just that her solution is wrong.
Her solution to the unlevel playing field is to increase government power to confiscate the unjustified wealth of billionaires and force businesses to incorporate social justice goals into their business plans. But not all billionaires earned their great riches unjustifiably. And while many businesses are very good at manufacturing goods and providing services, they may not be equally good at providing social justice. Most businesses thrive by specializing on a narrow range of products or services where they have experience, special expertise or market knowledge. To force them to try and achieve social justice goals where they may lack the technical expertise would be inefficient and could be counterproductive.
Take for example her $50 trillion (over ten years) plan to provide Medicare-for-All, that will wipe out the medical insurance industry (putting two million people out of work). It will also put price controls on prescription drugs. In essence, she wants to take all the profit out of healthcare and use the ”savings” to provide better coverage for everyone (except those that already have a plan that they like).I am sure that implementing the plan would do wonders at ameliorating her seething anger at all those people making money providing healthcare. There are just a few problems with the plan from a principled perspective.
One, healthcare in the United States represents 17 percent of GDP, more than any other large country in the World. In Western Europe healthcare accounts for about 7-11 percent of GDP. In China, healthcare is only 6.5%. The six-to-ten percent more that we pay for healthcare does not buy us better healthcare. It is all wasted instead of being available for other productive uses. Senator Warren asserts that getting rid of the insurance companies will get rid of this waste and fraud. But all this waste and fraud was caused by the government. All the bureaucracy and red tape associated with healthcare is due to government interference. Do you think that insurance companies like having gargantuan administrative offices to deal with mountains of red tape? They don’t make money from that.
Progressives always state the government can be more efficient than the free market by getting rid of middlemen and can provide products at lower prices by eliminating profits. Just one word – DMV. Well actually that three words but you get the idea. Governments are never very efficient. They have no incentive to be efficient. Competitive companies in a free market must be efficient or they will go out of business. And they are always providing better and better products at lower prices. All the middlemen in the healthcare industry are there because they take advantage of government regulations.
And Senator Warren states that her plan will lower costs by introducing price controls for prescription drugs. She says she is a capitalist, but she doesn’t understand capitalism. The price mechanism is Adam Smith’s invisible hand that provides all the benefits of a free market. By controlling prices, she will destroy the market’s ability to adjust supply and demand. In Venezuela there are price controls on essentials like diapers and toilet paper. But there are no diapers or toilet paper to be had in Venezuela because the free market does not exist. With one million percent inflation they can use their thousand bolivar paper currency to serve the function of the missing essential products.
Why do progressives think that when free markets deliver unintended consequences as a result of well-meaning but poorly thought out government regulations (as is the case for healthcare) that the answer is more government? It is not that all these progressive proposals being put forth by presidential candidates will make the economy work more efficiently or that the unwanted consequences will not outweigh the intended benefits. It is their heats that tell them to push for these proposals. Unfortunately, it is the jealous, envious heart that is guiding them.
And while we’re at it. If, for some incredible reason (such as the gods are angry at us), Senator Warren is actually elected president and, implausibly, is able to get Medicare-for-All approved, there is one other thing she must take into account. Me! I’ve been gypped! I want my money back! Why should all these freeloaders get Medicare for free while I have been paying into Medicare since its inception.
Over the years, I and my employers have put over $80,000 into my Medicare account. But I don’t want just the $80,000. The $384 that I earned in 1966 would be almost $3,000 in 2019 dollars. And the approximately $11 that I paid into Medicare would translate to over $85. I have calculated that just to break even from inflation the government would have to give me back $175,000. But wait a minute! If it was my money (and it was) and I was able to invest it (but I couldn’t) I would have put my money in the stock market. Compounding my Medicare contribution at the seven percent average rate of growth of the stock market would mean that the government owes me almost $350,000.
And I am sure that all the other people who have been paying into Medicare for decades will also want their money back. I have no way to calculate what the total amount would be, but I feel safe in guesstimating that it will come to many trillions of dollars. But if Senator Warren (excuse me! Madame President) can wave her magic wand and come up with the $50 trillion she estimates Medicare-for-All will cost; surely, she can give it a few extra twirls to pay me back what I am owed.