Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

“Either 'taxation without consent is robbery,' or it is not. If it is not, then any number of men who choose may … call themselves a government; assume absolute authority over all weaker than themselves [and] plunder them at will…”     Lysander Spooner

June 5, 2009

Is The “Public Plan” True Market Competition?

by Brad Warbiany

I’m not sure if this is a case of drinking too early in the day or willful dishonesty, but I can’t quite understand why Ezra Klein would misrepresent his opposition this badly:

I’ve been trying to figure out how to make this sound like more than a cute argument, because I think it’s actually a point my conservative friends should seriously consider.

In general, there are two ways for firms to adopt an idea. The government solution — the socialist solution — is to impose it on them by legislative fiat. An example would be Congress passing a law that makes selling New Coke illegal. The other path is through market competition. Plummeting revenue and rising market share for Pepsi convince the Coca Cola company that selling New Coke is a bad plan and they should cut it out.

It is perhaps evidence of the triumph of market-based ideas that the public plan falls pretty decisively on the right edge of that spectrum. The idea here is that the public plan will adopt effective reforms that will then lower its costs and improve its quality. In response, the private market will follow suit.

The conservative argument against a public plan is NOT that the plan will be too effective, too efficient, and too low cost for private insurers to compete.

The argument is that government will unfairly stack the deck against private insurers through outright subsidies or disparate regulatory regimes, while artificially presenting a lower end-user cost to the insured. Essentially we think they’ll keep premiums low by subsidizing the program on the back end through tax dollars.

The government has proven time and time again that it doesn’t like to compete on fair terms. When you can tax your competitors and take revenues out of their profits to subsidize your costs, you don’t have to compete on fair terms.

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3 Comments

  1. If you go back 100 years, identifying “socialism” with government grossly misrepresents what socialism was supposed to be as well. Government-imposed fiat is fascism, not socialism.

    Comment by Miko — June 5, 2009 @ 5:15 am
  2. Miko, fascism is the logical outcome of socialist government, as Hayek demonstrated in “The Road to Serfdom“.

    Comment by Eric — June 5, 2009 @ 7:37 am
  3. The differences between fascism and socialism are slight when compared with capitalism. They both shun reason in favor of altruism leading to a loss of individual freedom. The question of who holds title to what is moot if only the state can decide what to do with the property in question.

    Comment by John222 — June 5, 2009 @ 2:17 pm

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