A Stitch in Haste

Tyler Cowen has a follow-up on means testing generally (see my earlier post on his call for means testing of Medicare specifically):

Hardly anyone wants to endorse means-testing but almost everyone is for it. Of course Medicaid, food stamps, HUD housing assistance, and many other programs are already means-tested.

Perhaps, but many government programs that should be means tested (to the extent they should be provided at all) are not.

This is especially true at the non-federal level. Many cities, counties or states provide taxpayer-subsidized mass transit, for example, on the notion that keeping fares down “helps the poor.” But such subsidies certainly don’t help the poor who pay the taxes to subsidize the transit services but don’t use them. Moreover, those taxes also help the not-so-poor who take advantage of the services. Subsidizing a service such as mass transit (which, recall, might be a natural monopoly but is not a public good, since it is excludable) merely means that those who do not use it (whether poor or not) pay for those who do (whether poor or not). To the extent that such a wealth transfer correlates well to “the rich pay for the poor” is purely coincidental.

(Recall also that, unlike income taxes, local taxes tend to impact the poor equally or even disproportionately. Sales taxes and property taxes — which are mostly passed on to renters of course — come to mind.)

If one’s concern is truly to make mass transit more affordable to the poor, then why not scrap the taxpayer subsidy and instead issue means-tested vouchers? If we’re able to limit food stamps and housing vouchers to the poor, why can’t we also do it for fare cards?

The same analysis applies to, among many other things: taxpayer funding of the arts, rent regulation, and education at every level. Whenever the defense of such programs is “to help the poor,” ask yourself whether the program is means tested and, if not, then why shouldn’t it be?

Could it be that subsidies to commuter trains and symphonies — or the elderly via Medicare and Social Security — might not really be about “the poor” at all?

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Meanwhile, Cowen unsurprisingly draws Paul Krugman’s ire and fire:

[T]he issue of health care economics seems to make libertarians act like robots on bad science-fiction TV shows. You know, the ones that, faced with information that doesn’t fit with the assumptions in their programming, say “Does not compute! Does not compute!” and collapse.
…
I could say a lot more about this, but maybe the key point is this: we don’t have a Medicare crisis, we have a health care crisis.

Forgive me, but Krugman, um, does not compute. How blind a fool (or how bold a liar) does one have to be to suggest that the United States has a “health care crisis”? We have absolutely nothing of the kind. We have the most and best health care in the world — if you can afford it. That’s a health care financing crisis, professor. Try computing that.

Of course, what the robot really said in so many Lost in Space episodes was: “That does not compute.” But there was always a “that” there. The “that” here is the Great Lie of socialized medicine: the notion that health care is somehow not a scarce good like any other, that it need not be rationed, and that even if it does need to be rationed, then rationing by politicians and bureaucrats would be better than rationing by patients and physicians (and, yes, by insurance companies — paid by and therefore subservient to those very same patients).

Speaking of which, Krugman writes:

Means-testing isn’t the answer; setting priorities for care is.

As one Cowen commenter notes: “setting priorities” is rationing. That’s also what Krugman means. Does “rationing by some other name” smell as awful?

When it’s done by some unaccountable robot in the sub-sub-basement of a government health care bureaucracy concluding that the operation, procedure, test, device or drug that you need to stay alive “does not compute,” then yes: it does smell as awful. Much more so, in fact.

Filed under: Economics & Finance, Libertarianism, Socialized Medicine