Grumpy minds think alike

John Cochrane writes,

Why, in order to provide for the unfortunate, do we not simply levy taxes, and pay for charity care, and leave the rest of us alone?

I think the answer is relatively simple. Our political system is allergic to the word “tax.” Instead of straightforwardly raising taxes in a non-distortionary way (a VAT, say), and providing charity care or subsidies — on budget, please, where we can see it — our political system prefers to fund things by forcing cross subsidies.

As I put it, we are not Denmark.

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8 Responses to Grumpy minds think alike

  1. Handle says:

    The temptation to reduce any transparency that reveals ugly things is politically irresistible.

    One interesting wrinkle is that if government provides subsidies, even in the guise of ‘insurance’ programs with ‘premiums’, the details are subject to Freedom Of Information Act requests, and some analyst could easily calculate the “tax and charity” equivalent and infer some details about the demographics and costs of different pools of recipients.

    But when state-subsidized programs are laundered through private insurance company intermediaries, the actuarial tables are considered proprietary and guarded with extreme caution, and of course in a manner completely inaccessible to scholars and analysts, let alone the ordinary public.

    I’m not sure how libertarians would come down on whether such information should in fact be protected as if it were the property of an ordinary private company, in a sector where state subsidies are such a large part of the ‘market’, and regulations are so intensive.

  2. Lord says:

    That the ACA was largely funded through taxes on the wealthy rather than cross subsidies was demonstrated by the AHCA. That the wealthy aren’t above misleading on this is also clear.


    “If you divide total federal and state spending by the number of households with incomes below the poverty line, the average spending per household in poverty was $61,194 in 2011.”

    “…over 2.5 times the federal poverty threshold of $22,350 in 2011 for a family of four”

    === ===
    As Daniel Greenfield puts it,
    ( )

    What the class warriors know and their critics often don’t understand is that the real welfare queens aren’t the ones shouting about voting for Obama because they’re getting free phones. They’re the ones who administer the free phone programs.

    The welfare state isn’t run for the benefit of welfare recipients, it’s run for the bureaucracy that dispenses welfare and their contractors, with the welfare recipients as the pretext for the whole scam.
    === ===

  4. Max Marty says:

    We are also allergic to the word “charity”. A lot of people want to benefit from free or subsidized health care (along with many other goodies) but would never want anyone to call what they receive charity. Charity is low status, you see, and no one wants to be associated with the (or think of themselves as) indigent.

  5. BC says:

    Isn’t the obvious reason that some people prefer to have higher taxes and more charity care than desired by the general electorate but are unwilling to yield to that democratic verdict so, instead, they hide the taxes as cross-subsidies? As Obamacare architect Jonathan Gruber said, if the law was transparent, then it wouldn’t have passed. As Max Marty concedes, even many beneficiaries of subsidies wouldn’t want them if transparently identified as charity. Characterizing this phenomenon as a “preference” of the “political system” doesn’t seem quite right. Rather, it’s exploitation of cognitive illusion to achieve policy ends that would otherwise be unachievable given voter preferences.

  6. GU says:

    A transparent, simple tax-and-transfer system is antithetical to the politicians’ preferences. A complicated, multi-dimensional system with lots of different gatekeepers allows for a lot more favors and graft to be doled out, thereby aggrandizing the power of said politicians.

    • asdf says:

      This was my evaluation of Obamacare from my time working on it. Dems had the votes to make it more simple, and even in the non-democratic regulatory bodies controlled by liberals there was a strong desire for the more complicated solutions that allowed people to go through the public/private revolving door.

      Beyond mere corruption though, there were certain factors at play like ego (I’m the only one smart enough to understand this complicated program) and incompetence (turns out they aren’t smart enough). Often those factors aren’t conscious of intentional.

  7. Rick Hull says:

    Minor quibble, with Cochrane, in accordane with the more recent Boettke post:

    > our political system prefers to fund things by forcing cross subsidies.

    Individuals choose and prefer. Our political system has tendencies.

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