Health Care Reform Another Step in Decline of Our Economic Freedom

The passage and signing of the president’s massive health care reform legislation are the latest chapters in the socialization of the economy. No, this will not be a “tea party” rant about how such a change spells doom for our culture as we know it. But there are growing signs that our leftward lurch to a world of a bigger, more activist government may not in our best long-term interests.

Not a week after the health care bill’s passage, the Congressional Budget Office announced that Social Security would reach an ominous milestone: This year, Social Security will pay out more in benefits than it takes in from payroll taxes. Originally predicted to occur in 2016, the economic events of the past several years have hastened the crossing of this accounting Rubicon.

What does this imply? For one, the fund’s deficit will increase faster and be much greater than earlier projections. A few years ago, the CBO projected that the fund would run a deficit of about $50 billion in 2019. The new numbers push that estimate closer to $60 billion. The bottom line is that unless revenues are increased or payments are cut, Social Security will become insolvent earlier than the 2037 projection made several years ago. And, given the demographic characteristics of the population, that day is more likely to come even sooner.

What does Social Security have to do with health care? When we see that Social Security will become a larger budget burden in the future, it presages what we can expect from the move to socialize medicine in the United States. The problems arise from the fact that those who pass such legislation do not have the time horizon required to plan for long-term consequences.

In its rush to pass the first national medical plan Medicare and its companion Medicaid Congress sought the kind of political deals that get legislation passed but may ignore long-term economic consequences. Witness the financing difficulties that these programs face today. Some have argued that it is because of these programs that the delivery of health care has become so expensive: If the government is paying for it, why not run redundant tests?

How many times in the recent health care debate was it mentioned that failure to pass the bill (and vice versa) would have dire consequences for this fall’s election? If your time horizon is two years, should we expect someone to worry about consequences that may take decades to happen?

For those who believe that increased government involvement in their lives is a good thing, look to Great Britain. The government accounts for more than 50 percent of the economy’s gross domestic product. The economic crisis of the last few years has exposed the weaknesses of its extensive welfare system. Recipients of government services and those who administer them see no reason that services should be cut or taxes raised. As reported by the New York Times, Britain’s Chancellor of the Exchequer Alistair Darling said that “cuts in [government] spending would be wrong and dangerous.” Union leaders have averred that they will accept no cuts in pay. How, then, will increased deficits and a burgeoning government debt be financed? With weak economic recovery a likely scenario, it must be through higher taxes.

The United States is not Great Britain. Unfortunately, it does not appear that we are learning from their mistakes.

The shift to increasing the government’s presence in our daily lives seems inexorable. What makes this questionable is the revealed ineptitude of those who “run the business.” In good times, politicians spend money to curry political favor without due regard to potential risks. The multiple news stories depicting the plight of local school districts and state university systems facing shortfalls in state appropriations should give pause before we eagerly assign additional duties to the state.

The United States has long enjoyed a broad-based commonality with the British. Too bad that this will now extend to a decline in our economic freedom.

Rik W. Hafer is distinguished research professor and chair of the Department of Economics and Finance at Southern Illinois University Edwardsville and a scholar at the Show-Me Institute.