New day for health care

Government expansion will break the budget

March 23, 2010|By Douglas G. Smith

With Sunday's historic vote in the House of Representatives, the Democrats have succeeded in making serfs of us all. Having added $2 trillion to the debt in a single year, the administration pushed through a massive new entitlement program that undoubtedly will add trillions more. Just as the medieval population labored to support their feudal masters, so too we increasingly labor to support an all-encompassing federal government. The size of the new federal entitlement and its implications for fiscal policy will have significant ramifications.

As a threshold matter, the mounting debt invariably will lead to broad-based tax increases. While the administration promoted the bill based on the notion that only the "rich" will incur additional taxes, the bill is not fully paid for. Only by resorting to gimmicks was the administration able to obtain a deficit-neutral determination from the Congressional Budget Office. New taxes will be necessary to pay for this new entitlement, and there is a limit to the revenue that can be raised by taxing the so-called "rich" making over $200,000. If it cannot impose new taxes, the federal government will resort to printing more money, leading to inflation.

The control the federal government exercises over our lives will also increase drastically. The health care bill places the federal government at the helm of the health care industry, creating scores of new bureaucracies and giving the federal government the authority to shape health care policy. This aspect of the bill represents a profound erosion of our freedom, for what is more fundamental than the freedom to make choices that impact the health and well-being of yourself and your family?

As this administration has made clear, it does not hesitate to take advantage of a "crisis" to expand government power - even a crisis of its own making. For example, the administration's policies are devastating the national economy, with unemployment rising to more than 10 percent. The administration has used this "crisis" to pass a series of "stimulus" or "jobs" bills that only increase the size of government. One can easily see this or future Democratic administrations calling for additional taxes when their new health care entitlement exceeds their overly rosy cost projections. Likewise, one can easily see this or future administrations calling for even greater federal intervention in the health care system when the current plan produces adverse consequences such as increasing costs and premiums, or a potential doctor shortage as physicians abandon their practices.

However, the unintended consequences of this major expansion of government may be the most troubling. One potential consequence that has not received much attention turns on the competence of the federal government (or lack thereof). We do not have a history of a competent, professionalized bureaucracy. The individuals in charge of the health care system will be the same people who failed so miserably during Hurricane Katrina or who preside over the massive fraud plaguing the Medicare system. Measures that expand the federal government push the country in a direction in which it does not have a comparative advantage. While European countries may be able to administer large state bureaucracies with some competence, we have proven that we are incapable of doing so.

Another potential consequence is a net outflow of talented and educated individuals from the United States. While we have a history of attracting talented and educated immigrants, we simply cannot take this for granted. As the government taxes a greater share of our income and exercises more control of our lives, the United States becomes a less attractive destination. Why would someone want to come to this country if they could make more or live more freely in their home country? Already, there is evidence that foreign students educated in the United States are less likely to stay here than they were in the past.

As government taxation and control become even greater, it is conceivable not only that immigration of talented individuals will decrease but that we may see an increase in emigration. At some point, the expansion of government will lead the skilled to seek greener pastures elsewhere. We cannot assume that we can tax the "rich" indefinitely. Their first reaction will be to attempt to shield their assets from increased taxation, as they did in our recent history when tax rates were higher. To the extent they cannot do so, they may consider leaving the country.

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