Sunday, May 15, 2011

Advancing Liberty, Creating Change

Two days ago I had the wonderful opportunity to attend a symposium co-hosted by the Institute for Humane Studies and the Mercatus Center. Held on the 25th floor of the Hotel Nikko, the views were as stunning as the speakers were inspiring.

The formal part of the symposium was opened by economist Dr. David Henderson who described the almost miraculous success of the Liberal Party in Canada which, through real and significant cuts in government spending, brought Canada back from the precipice of economic disaster. In 1995, the WSJ called the Canadian dollar the "peso of the north" and Moody's put Canadian credit on watch. At that time, Canada had a debt-to-GDP ratio of 70%. Following these cuts and important changes in unemployment benefits, Canada then ran budget surpluses from 1997 until the international recession of 2008. The big lessons from this Canadian experience for U.S. politicians are the following:

You can cut spending and still get reelected.
You can cut spending and the world does not fall apart.
You can cut spending and grow the economy.

As our Congress continues the Budget Debates, let's work to remind them that these truths will also hold for health care spending.

Next, Adam Thierer spoke on the very important battle to preserve internet freedom. Although his talk was equally fascinating as the others, it wasn't as directly relevant to health care so I refer you to his written body of work for the details of his ideas.

Adam was followed by Matt Mitchell, speaking on the growing problem of unsustainable trends in state government spending and debt. The two largest contributors to this problem are Medicaid and the effects of public employee retirement benefits. From his talk, I took away two key points.

Unions in the private sector increase the wages of some workers at the expense of other workers, but are limited in what they can demand from their employers because of business' need to make a profit. (What came to my medical mind was the fact that a successful parasite doesn't kill off its host.) If profits decrease too much, the business (and the jobs) will disappear. Unions in the public sector don't have customers paying for goods and services--they have taxpayers, who can't choose to go away. Also, in the public sector, unions get to vote for and select the people with whom they negotiate for their benefits. In the private sector, unions don't get to vote for their employers (other than with their feet.) The fundamental incentives for public unions have no brakes. To improve the situation, we need to change the rules and alter the incentives. Tweaking the numbers will never be enough.

With regard to Medicaid, Matt showed that the problem goes beyond the incentives for expansion that the current system holds. (Because of Federal matching funds which shift state costs to the country as a whole, States have the incentive to continually expand Medicaid programs.) He also pointed out that whenever government funds a program, it creates a powerful vested constituency which pushes for continued spending and expansion. Data shows that when the Federal government reduces payments for state programs--the programs don't shrink or go away. The states just continue to fund them through state debt or raising taxes. A looming danger of the PPACA is the enormous new entitlement constituency it creates, not only through the expansion of Medicaid, but also through insurance premium subsidies.

The formal talks were punctuated with opportunities to talk personally with the speakers and fellow attendees. It was an exciting chance to meet face-to-face several people whose works I have admired from afar, or have met only in the cyber-world of Yahoo groups. In spite of the very real and significant challenge to individual rights which our country currently is facing, the general mood of the speakers and the audience was decidedly optimistic. I left encouraged and inspired, knowing that people of such intellectual caliber and integrity are fighting for the cause of freedom.

(Report on the symposium will be continued next post.)

Update: New paper out from the Mercatus Center-"Public Sector Unionism: a Reivew"
Update: Paper on-line by David Henderson CANADA’S REVERSED FISCAL CRISIS


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