Starve the Beast

While filling out my official voting ballot for Washington state this past weekend, I came upon Senate Joint Resolution 8225, a proposed amendment to the state's Constitution concerning calculation of the state debt. Of all the initiatives and referendums on the ballot this year, this particular measure is probably one of the least controversial and will likely be approved by a large margin.

But should it be?

Article VIII, section 1 of the Washington Constitution establishes a limit on the debt that the state government may contract. The limit is based on the average revenue the state has collected for the past three years. This is a very wise part of the state constitution because it prevents the state from getting in over its head. Just as American citizens must work within the confines of a family budget and be careful not to borrow more money than they can pay back, so must the government be fiscally responsible. As we have seen recently with the federal government and with numerous state governments, politicians are all too eager to borrow and spend money with little regard to how that money will be paid back.

Through a new federal program called Build America Bonds, the federal government actually pays a portion of the interest on certain types of state bonds. In response to this, SJR 8225 wants to modify how the state's debt is calculated by adding the following sentence to subsection (d):

In addition, for the purpose of computing the amount required for payment of interest on outstanding debt under subsection (b) of this section and this subsection, "interest" shall be reduced by subtracting the amount scheduled to be received by the state as payments from the federal government in each year in respect of bonds, notes, or other evidences of indebtedness subject to this section.

The effect of this change, as explained in the state voter's guide, would be to lower the amount of debt the state thinks it has, thereby allowing it to take on even more debt, despite the fact that the constitutional debt limit would not change.

Proponents, such as the official Statement For and this Seattle Times editorial, seem to suggest that this amendment will yield substantial "savings" or that the state will receive "free money". These arguments are misleading for couple of reasons.

First, the state will receive money from the federal government regardless of whether or not this amendment is approved. In order for the amendment to allow the state to receive more money from the federal government, the state would have to issue more bonds. More bonds means more interest owed, which means more money from the federal government. But it also means more debt! What happens if the scheduled payments from the federal government don't materialize? There have already been instances where states assumed the federal government would give them money but it never actually happened. Granted, this situation is a bit different in that a law was already passed. Still, if you are in debt, and someone offers to pay a portion of what you owe, the responsible thing to do is to be grateful and take what they are giving you. You don't go out and spend even more money in the hope that they will cover you further and then call that "savings".

Second, money from the federal government is not free! Perhaps from a naive state government's point of view it is "free". However, federal money is taken from federal tax receipts, and the last time I checked, Washington state residents pay federal taxes. Whether the money is handed over with the left hand or the right hand, it still comes out of your wallet. Or to be more precise, it comes from your wallet and your children's and grandchildren's wallets.

And that's really what the amendment is all about: Adding more debt that has to be repaid by someone else in the future. Hopefully the people of Washington state will see past the accounting gimmickry and realize that there is no such thing as a free lunch.

Update: November 3, 2010 - Looking at the election results for Washington state measures shows that SJR 8225 passed by a very narrow margin with 51% to 49%. I have to admit I thought it would be a blowout approval, but perhaps this shows that people can be more perceptive than I gave them credit for. It's still too bad the measure was approved.

Obamacare's Flawed Assumption

With the midterm elections coming up next month, I want to take a look at one of the issues that received heavy focus during the last two years, namely health care. You have probably heard the numbers so many times you can recite them with me: 47 million Americans are without health insurance. The U.S. population is just over 300 million, so about 1 in every 6 people does not have health insurance. In March of this year President Obama signed the Patient Protection and Affordable Care Act (a.k.a. Obamacare) in order to address this apparent crisis.

Let's back up to October of 2008. During the second presidential debate Tom Brokaw asked the candidates the question "Is health care in America a privilege, a right, or a responsibility?" Barack Obama's answer:

Well, I think it should be a right for every American. In a country as wealthy as ours, for us to have people who are going bankrupt because they can't pay their medical bills -- for my mother to die of cancer at the age of 53 and have to spend the last months of her life in the hospital room arguing with insurance companies because they're saying that this may be a pre-existing condition and they don't have to pay her treatment, there's something fundamentally wrong about that.

My question is: Why is health care a right? Is health care a right because it is expensive? Waterfront homes are expensive, but they are not a right. Is health care a right because we think it would be wonderful if everyone had it? It would be wonderful if everyone had a home, three meals a day, a Ferrari, and a 52-inch plasma TV, but none of those are rights.

Some would argue that it is the Constitution that grants us the right to health care – that health care falls under the “right to life”.

My first response to that argument is that the Fifth Amendment to the Constitution says that “No person … shall be deprived of life, liberty, or property, without due process of law”. This statement means that the government cannot take away life, liberty, or property. It does not mean that it is the government’s responsibility to give these things to its citizens. It is government’s responsibility to protect our rights from being taken away by other people. It is not government’s responsibility to take from other people in order to give to us. This includes taking from medical care providers, because if health care is a right, then the government must compel them to provide services to the rest of us.

My second response to the argument is that if health care somehow falls under the right to life and if somehow the government should provide everyone with health care, then what about the numerous other things without which we cannot live? We cannot live without food, water, or shelter. Should not these things fall under the “right to life” as well? Where does it end? A lot of people might claim that we cannot live without love. Should the government provide love to everyone as well?

Though Obama's ideology makes people feel good, it is fraught with peril. The implication in Obama's response is that we as a country have enough money to pay for everyone's health care. As much as I would like it to be true, experience tells us that solving problems is more than just throwing more money at them. At the very least, we know that it depends on how that money is spent. And when money is spent, the one doing the spending is usually the one deciding what is done with it. This means that government, not the person, makes the decision about what the best treatment is for a given condition.


Just what is the "best" medical care? There is no universal answer to the question, and there is certainly no single set of standards that applies to everyone equally well. Which combinations of various treatments are "best" for a given set of health problems? For which of dozens of drugs should the government pay in order to treat a given condition? Which treatments are "valid" treatments and which are not? Should the government pay for Treatment A that is likely to eliminate Condition X, possibly exacerbating Condition Y, or should it seek out a lower cost alternate Treatment B that has a lower chance of success? Should other taxpayers be forced to pay for someone's acupuncture treatment or psychotherapy sessions? Should the government pay for therapeutic massages as a component of "preventative health care" because someone claims to be too stressed? Should not someone with a terminal illness be able to seek out unorthodox or “unproven” treatments? The human body is extremely complex, and health care equally so.

What is really "fundamentally wrong" is that Obama's statements ignore the true cost of medical care in terms of basic economics:

From the standpoint of society as a whole, the COST of anything is the value that it has as in alternative uses.

~ Thomas Sowell

The real cost of medical care is the alternative uses of the resources that it requires. Probably the most important of those resources is people. In order to have more doctors, nurses, and other medical professionals, there must be fewer teachers, policemen, and janitors. Another resource is land. In order to have more hospitals and clinics we have to have fewer houses, schools, and commercial offices. Other items needed for medical care are food, drugs, and equipment, all of which are made from resources that have other uses.

The point here is that despite the fact that we can all claim that everyone deserves health care, and despite the fact that we truly live in a "wealthy" country, we still cannot get around the fact that there are not enough resources to meet all of our needs. Thinking otherwise is a flawed assumption. Money is just a tool for exchanging real goods and services, and health care does not exist in a vacuum.

We should not leave it up to the government to tell us what resources are more important than others. We should not accept, for instance, that doctors and hospitals are more important than farmers and farmland, simply because the government says so. After all, people will die if they don't get food. A small group of "experts" cannot possibly come up with a set of rules that efficiently makes these kinds of decisions for everyone. In reality, you are more likely to find yourself in the best situation if you get to make all these decisions for yourself.