I’m watching a Hillary Clinton political rally on Fox News…….. I’m awake… I’m awake.
Anyways, her new campaign slogan is “Solutions for America”. I’ve already bashed Barack Obama for his slogan of “Change” without any sign of what that change will mean, so now it’s Hillary’s turn. “Solutions for America” sounds like a good thing. We should be trying to come up with solutions to the problems America faces, shouldn’t we?
The question becomes who is the “we” we are speaking of. In Hillary’s case, she wants to come up with GOVERNMENT solutions to America’s problems. Since when did the American dream rely on the American government to act? Ronald Reagan said it best when he said the 9 most terrifying words in the English language are “I’m from the government and I’m here to help”.
There are only 2 results from government solutions to America’s problems: ineptitude and inefficiency. Let’s look at some examples…
Social Security is the government solution to retirement. Social Security funds invested in a government trust fund provide a terrible rate of return (under 4% typically, less than 1% above inflation). Let me break this down into actual numbers. A 27 year old making $50,000 a year in the Social Security program can expect a monthly retirement income of $1,522 at retirement age of 65 (if the politicians haven’t spent all of that by then and you can still draw retirement at 65).
In contrast, if that same 27 year old invested only 4% (as opposed to the payroll tax which is 12.4%) from now until retirement age of 65 (38 years) in common index stock funds at an average rate of return of 10.99% (which is what stock funds have averaged for the last 10 years) that stock fund will be worth $1.1 million dollars and will be worth over $7,000 a month in interest alone. The private, free market plan would also allow that $1.1 million to be passed along to future generations. Inefficient is putting it mildly… it’s borderline theft. $1.1 million and $7,000 a month in interest traded for $1,522 dollars a month? This is a “solution” we frankly can’t afford.
Medicare is the government solution to healthcare for the elderly and those who otherwise cannot afford private health insurance. Here is an excerpt from the Senate Budget Committee testimony of Robert Reischauer:
Fee for service Medicare, which enrolls some 85 percent of all participants, lacks strong incentives either for beneficiaries to seek or providers to supply only cost-effective care or, for that matter, only care that has a reasonable chance of improving health outcomes. Of course, many private sector health plans also suffer from this deficiency. Medicare, however, faces another challenge —setting its payments at the right level—that does not bedevil private plans to the same degree. The program pays for thousands of medical services delivered by hundreds of thousands of providers and suppliers operating in hundreds of separate market areas. Because it must operate throughout this very diverse nation, it is impossible to set uniform payment rates that will be efficient everywhere. Some providers are overpaid, others are undercompensated. Because the consequences of underpayment are so serious—denial of access to needed services for a vulnerable population—and because political pressures can affect payment policies, overpayments (rather than under payments) tend to be the norm. Of course, all complex systems tolerate some inefficiency because the costs of wringing out the excess exceeds the gain. But the level of inefficiency accepted in Medicare is higher than that in private sector plans because Medicare, being a government program, has objectives other than efficiency, such as ensuring that certain types of providers survive in rural areas. As reform options that promise improved efficiency are debated, it will be important to consider whether and how these other goals of the Medicare program will be met under a restructured system.
I recently did some work in a hospital in Arkansas which is basically broke. I asked why and the response I got was Medicare payments from the government are often delayed and sometimes just don’t come. The inefficiency of Medicare has become ineptitude in that while it helps its participants, it cripples the hospitals which are required to accept its payments.
Public schools (government schools) are the government solution to education. I don’t think I need to elaborate on the ailments of the United States government school system. Each presidential candidate has mentioned that he/she wants to make our school system the envy of the world. The only way for our education system to be the envy of the world is if the government gets out of the education business altogether. In fact, up until a few decades ago, our education system WAS the envy of the world… that is until government started getting in the way.
Government solutions provide problems where answers should be. The free market is infinitely better at coming up with solutions to America’s problems.
America’s problems are the result of government intervention not a reason for more of it.