Obama, health care, and the new road to serfdom

Unless those who love liberty stop it, the radical ideological belief in political paternalism and the welfare state may leave nothing but tyranny and poverty for generations to come.

At the core of the Obama administration’s push for implementing a comprehensive national healthcare system and related programs is a radical ideological belief in political paternalism and the welfare state. Let’s examine the premises behind – and realities of – welfare statism.

Power and paternalism

First, the guiding idea behind political paternalism is that the individual cannot be trusted to be a free and responsible human being. Those who wish to socially engineer our lives consider us too ignorant, too irresponsible, and too narrow in our own planning to intelligently and reasonably take care of our own healthcare, retirement, family’s education, or spending and consumption choices.

These paternalists presume to know what is good for us, better than we know ourselves. They are determined to make the world over in their own ideological image – and, of course, all for our own good, whether we want it or not.

They are also willing to use force against their fellow human beings to attain their ends. They believe that it is morally right for the state to use its coercive powers to take the income and wealth of some to give to others.

Sound exaggerated? Well, imagine how the government would react if you inform the government that you are sending in a tax payment for your contribution to police, courts, and national defense, but you’re withholding any amount that would fund a national healthcare plan because you consider it unnecessary and immoral. You’d soon face jail time if you resist the confiscatory seizure of your property for unpaid taxes.

Political plunder 

Second, a number of economists, such as Nobel laureate James Buchanan, have taught us that the actual politics of government intervention and redistribution has little to do with high-minded notions concerning some hypothetical “public good” or “general interest.” The reality is that politicians want campaign contributions and votes to be elected and reelected. In exchange, they offer other people’s money, in the guise of “targeted tax breaks” or “social programs.” 

This tendency toward political plunder is due to what is called a “concentration of benefits and a diffusion of burdens.” Suppose that in a country of 30 million people, the government taxes each citizen $1, and then redistributes that $30 million among a special interest group of 30 individuals. The 30 recipients have a strong incentive to lobby, influence, and even corruptly “buy” the votes of the politicians able to pass this redistributive legislation. Each individual taxpayer, on the other hand, has little incentive to counterlobby legislators merely to save $1 in taxes.

Thus, modern democracy has degenerated into a system of political plunder and special privilege at the expense of consumers, taxpayers, and competing producers in society.

The mirage of social justice

Third, as another Nobel Prize-winning economist Friedrich A. Hayek argued, even if we assumed that paternalists have the most benevolent motives, there is no real meaning to ideas such as “social justice” or politically enforced “fairness.” They are all “mirages,” Hayek warned. The market does not reward some hypothetical notion of “merit” or “goodness.” It rewards “service” – creation of value to those willing to pay for it.

There is no impartial way the state can bestow on each member of society some fraction of national income that reflects their “socially just” amount.

Hence, it is far better to leave such issues to private charities, who spend money based on their personal standards of benevolence. Because they rely on voluntary contributions, charities are far more efficient than the coercive monopoly welfare state. After all, if charities can’t demonstrate effective results, funds will go to competitors. 

Moral hazard

Fourth, the welfare state produces perverse incentives and behavior across society. Economists call this “moral hazard.” If the costs of someone’s mistakes and bad judgment are paid for by others, then the offender has no incentive to correct course. Moral hazard encourages reckless actors to keep acting recklessly. It even nudges upstanding citizens to act irresponsibly.

Because of earlier government bailouts, the “too big to fail” firms on Wall Street believed they could act recklessly with their depositors’ and investors’ money, because they were confident (justly so, it turns out) that government would bail them out if their “creative” investment strategies turned into big losses.

If individuals expect the government to plan for their old age; provide their healthcare needs; oversee the education of their children; guarantee them a job; monitor what they eat, drink, watch and read; as well as cover their losses from bad decisions; then why or how shall those individuals ever learn or be motivated to be more responsible in these and related affairs of everyday life? This does not make for a healthy and productive society in the longer run.

Growing government debt

Fifth, an expanding welfare state generates growing financial demands on the regulatory and redistributive powers of the state. With no “fiscal constitution” imposing a balanced budget or other limits on the expenditures of the government, modern democratic society has plunged further and further into deficit spending and mounting government debt. Today, US government debt is growing by the trillions of dollars.

Government debt is a lien on citizens’ income in the future, since the principal and interest must be paid when IOUs come due. Thus today’s deficits mean higher taxes or even more government borrowing tomorrow. But debt also imposes costs today. Every dollar borrowed by the government today is a dollar not being used for, say, capital formation, technological innovation, or improvements in private-sector job skills so workers may earn higher wages in the future.

Instead, that dollar is used by government for current consumption: government employees’ salaries, welfare payments, or the fuel to fly  Air Force One. As a result, society is that much poorer.

The new road to serfdom

All of these factors show the menace and the immorality of the welfare state. The welfare state has been and will continue to lead us down a dangerous new “road to serfdom” in which our lives are more and more controlled, managed, and manipulated by those in political power who claim the right to dictate how we are to live and work.

It encapsulates an immorality in which political force claims the authority to deny us our individual rights to life, liberty, and honest acquired property. 

All of us who prefer to be free men in a free society with a free market need to do all in our intellectual power to stop and reverse this reactionary counterrevolution against the ideal of human liberty. Otherwise, our civilization may be heading for a collapse that will leave nothing but tyranny and poverty for generations to come.

Richard M. Ebeling, a former president of the Foundation for Economic Freedom, is a professor of economics at Northwood University in Midland, Mich. He’s the author of the forthcoming book, “Political Economy, Public Policy and Monetary Economics: Ludwig von Mises and the Austrian Tradition.” A longer version of this essay originally appeared at Professor Ebeling’s blog.

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