Is Social Security a Ponzi Scheme?

Thanks to the Republican debates, the idea the Social Security is a Ponzi scheme is back in the news! I thought I would repost a comment I published on this notion the last time it turned up, during the furor about the Madoff case. Also see my comment on the complexities of this idea here.

Carlo Ponzi had a brilliant idea -- brilliant at any rate by the standards appropriate to judging the intelligence of criminals: Invite people to invest their money in your scheme, and pay them surprisingly large returns. But these payments are merely taken out of the deposits of new customers, who will be payed from deposits of still newer customers. But there really are no investments involved, and they rest of the money isn't going anywhere but into the conman's pockets.

Now that the economic downturn has exposed Bernie Madoff's truly despicable crime, the largest Ponzi in history, such schemes are in the news again, and some libertarians are making the familiar claim that the Social Security Administration is itself a Ponzi pyramid, far larger even than Madoff's . If so, the notion that Madoff's is the biggest such scam ever are in fact wrong. His is merely the largest private one. No one does it like the state.

Is it true that Social Security is a Ponzi scheme? I don't think it is (nor is the related idea true that SS is "insolvent"). I think the comparison does bring out features of the SSA that are ethically problematic, but the ethical problems are rather different from those that consigned Mr. Ponzi to prison (and, were there only such a place, to Hell).

The SSA pays Grampa Jones with money extracted from Jones Jr., who will eventually be paid with money extracted from Jones III. There is that much resemblance to a Ponzi.* The difference of course is that everyone knows from the outset that this is what Social Security is like.

As Nat pointed out to me recently, one of the important features of a Ponzi scheme, very often, is that the swindler sometimes avoids making payments to his victims. "Wow that's a huge dividend! Why don't you just reinvest it for me? I'll make even more!" Why sure, I'll reinvest it for ya. Heh heh. With SS, no beneficiary would ever do that because no one is under the illusion that this is an investment plan.

Social Security is nothing but a conduit by which wealth is extracted from those who produced it and transferred to those who did not. Of course, that is also true of a Ponzi scheme. But the difference is that Pozis do it with fraud, while SS does it with force. Social Security is to a Ponzi scheme as coercion is to deceit.

That is not a morally trivial difference. The people who received dividends from Madoff were benefiting from acts that violated the rights of others. But they were unwitting and innocent beneficiaries. What is Grampa Jones? He may be innocent, but not because he is unwitting. The ethics of his position are more complex and murky than those of Madoff's victims.

There is a particularly vicious sort of coercion involved in the SS system that many others have noticed. Suppose that we the people decide that we want to liquidate the system. What do we do with Grampa? All his working life he has been paying money into this growing, spreading system. Can we abandon him? And where will the money to support him come from? And how will we refund the money that the still-productive who have paid, usually enormous amounts,** into the system? They would have put part of that money into private retirement accounts, but now they can't do so, because the SSA took it from them.

That is why the economic sterility of the system is ethically problematic: not because it is fraudulent, but because it makes it all the more coercive. There is no fund of capital that might have enabled us to liquidate it. The generation that voted SS into being were handcuffing us to a monster. In this way, what they did was profoundly anti-democratic.

Update: Also, see this.
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* Interestingly enough, when Junior pays more that Gramps needs, a trust fund accumulates, but by law this money must be spent on government bonds. In other words, it goes into the pockets of the perpetrator of the scheme. Again, like a Ponzi snow job.

** In 77% of cases, the employee's contribution plus that of the employer (which ultimately comes out of the employee's hide as well) is greater than the entire federal income tax paid by the worker.

Why are Government Workers So "Entitled"?

Government workers in Greece, faced with austerity measures, rioted and firebombed a bank, burning to death three human beings trapped inside. In New Jersey the Governor responded to a severe recession by denying government school teachers their expected annual raise (a raise, during a recession) and the reaction from public sector unions was screaming, white-faced rage. Here in Wisconsin, the Governor is trying to limit the collective bargaining rights of state workers -- a measure that would leave them with roughly the same rights that federal workers have -- and the reactions from the unions was three weeks of demonstrations, illegal obstruction of the legislative process, and an unprecedented flood of death threats and obscene phone calls.

Clearly, these people sincerely believe that they have rights that people in the private sector do not have. Why?

I mean this seriously as a question. I am struggling to understand. In my moral universe, the income of the government worker is more, not less, ethically dubious than that of a private worker. If you are flipping burgers in the private sector, every penny of your income comes from people who like your burgers enough to pay for them. They are glad to do so. In government work, every penny is extracted by force from somebody like the burger-flipper, someone who produces goods and services sold in the marketplace. How can anybody think this is a right, let alone collective bargaining for more money to be collected by force?

Part of the reason, obviously, is that these indignant government workers do not see things this way at all. They are simply "workers," and their public sector union is simply "a union." Thus the reasonable sympathy that people feel for the producers of goods and services is extended -- fallaciously, I say -- to them.

Another reason is the one suggested by Louis C. K. in the above video: people just naturally tend to think that whatever the have right now, regardless of where it came from or how obtained, is a "right." Also fallacious, of course, but understandable. I get it.

But there must be more to it than that. Haven't we learned in the last year or so, that government workers feel more entitled than others? After all, starting about 3 or 4 years ago, families in the private sector started to behave as if family members would be laid off or cut back. And they were, and they did the best with it that they could. When private sector workers lose economic ground they do not scream, demonstrate, or riot.

I can think of two special factors at work here. One is the law. Here is a fact that will amaze government workers: People in the private sector do not generally feel that they have a right to their own jobs. One main reason is that, legally, they don't. Most of them can be fired at any time and without cause. It's called "employment at will." Government work is not like that. Those people do have "rights". It's a different culture, and I suppose it leads to a mindset of entitlement.

The other factor is the profound difference between markets and taxation. The burger-flippers of the world know very well that their income is paid by the customers, and if the customers stop liking their burgers, there will be no money to pay them. Period. They will have to go, and there is no use whining about it. The insecurity of their income stream is brought to mind every day.

The opposite is true of government workers. Their income, being collected by force according to rigid rules, seems absolutely secure. There is no reason to think about it at all. And so they don't. Thus the effect of the Louis C. K. principle is enhanced, squared, cubed. If whatever I have at the moment is a right, then whatever I can't fail to have must be an absolute right, a human right, a natural right!

This, too, is an illusion. Government money is indeed less insecure than private money, but it is not absolutely secure. In bad times, tax money dries up and belts must tighten. This however comes as a profound shock to many government workers. Hence the indignation and the explosions we have seen.

This anyway is the best explanation I have come up with so far.

[Special note in response to the hate mail I am likely to get for writing the above: I myself am a government worker. So if you think that I am saying that government workers are bad people, or that the never do fine work and provide essential services, then all I can say is take a deep breath and read this post again.]

Is the Government "Broke"?

Screaming debates now raging about fiscal matters raise an interesting question: are the various governments in the US - federal, state, local - broke? Underlying this is a deeper conceptual question: does a concept like "broke" even apply to governments?

As to the idea that the US is indeed broke, the New York Times has said:

It’s all obfuscating nonsense, of course, a scare tactic employed for political ends. A country with a deficit is not necessarily any more “broke” than a family with a mortgage or a college loan.

Admittedly, the mere fact that the feds have a "mortgage" amounting to approximately $14 trillion in debt does not, independently of any context whatsoever, mean that they are broke. But of course, neither does any other single number. You need at least two numbers to figure that out. But the deficit does involve two numbers. Why aren't they the right ones? A family that spends more than it takes in, that is going into debt just to meet living expenses would be "broke."

In finance, solvency is the fact that current assets are sufficient to meet current liabilities. If you are going further into debt to meet those liabilities, you are broke. (This simple point is well made by Bill Anderson here.)

What are these people thinking? Probably something like what Michael Moore is thinking in the video below: there is a lot of money out there that the government has not taken yet. In the memorable words of Cuffy Meigs, "There's plenty of pickings left" (Atlas Shrugged, 1st ed., p. 947). The government is not broke until there is nothing left for it to take.

That means, they are thinking, that governments can't go "broke." This may be true, but in that case their fallacy is in concluding that governments are eternally solvent.

"Solvent" only applies in the context of property rights: you are solvent if your assets are sufficient. The fact that I have assets that you haven't taken from me is irrelevant. Of course, you can't take my assets, whereas the government can. Should we therefore think of my assets as the government's assets?

The truth of the matter is that governments are radically different phenomena from private organizations and have to be understood with radically different ideas. If governments can't be broke, they can't be solvent either. Neither idea applies. We need different ideas.

In a way, we already do think of governments as being radically different: we naturally tend to think of them as magically immune to the shocks of destiny, unlike every other organization on Earth. Governments mean absolute safety and security.

We are now waking up to the fact that they do not. They are not different in that way.

The powers to tax and to inflate the money supply are indeed financial wild cards the government can play whenever it wants, but they are not magic. Even the Meigs-Moore theory has to admit that there is an absolute limit to what the government can take: the surplus above the producers' survival level is all that is available for taking. But long before it reaches that fatal level, government will face horrific consequences.

What governments are now doing is bringing these consequences closer and making them worse. This is the fundamental, undeniable fact of the day, and talk about not being broke only covers it up.

How Much do Wisconsin Teachers "Really" Contribute to Their Benefits Package?

One of our graduate students brought these two articles to the attention of her Facebook friends (which includes me) yesterday: this one in the Wall Street Journal and this one in the web site tax.com. The WSJ tells a rather hair-raising story about what a large contribution the state government and school districts are paying into the pension plans and medical insurance of public school teachers. In some cases the teacher's own contribution is zero. The Tax.com article claims that in every case the teachers own contribution is actually 100%! How, my young FF wondered, can there be such wild disagreement about a plain matter of fact?

Good question! I think the answer is that there is really no substantive disagreement here at all. They are simply describing exactly the same facts in different ways. The Tax.com author, David Cay Johnston, maintains that medical insurance and pension contributions from the government are really from the worker. The reasoning seems to be this: "Wages" properly refers to everything you are given in compensation for your work. Since the state and the districts give the teachers these benefits as compensation for work, they are really part of the worker's wages. Therefore the worker's contribution to their benefits packages from their wages is not 4% or 8% but 100%. They already contribute it all!

This is of course nothing but word-magic.

In one way, though, it is simply not true. If it were actually true that compensation with benefits is actually equivalent to compensation with pay, then it would also be true that, if the teachers were given no benefits at all, they would be getting its full value in pay. That would mean that the Milwaukee teachers being discussed in the above video would be getting an average of $100,000 a year in cold, hard cash for 9 months of work. That of course is absurd. Taxpayers in the private sector are slow to anger and their anger has usually has little effect, but they would never sit down for that.

It makes a difference, probably a big one, that about half of Wisconsin teacher compensation is concealed in the form of perqs rather than pay. I means that it does not show up on transparency web sites like this one. It means that workers in the private sector -- about half of whom have no pensions at all -- cannot accurately assess how much they have to work in order to support these people.

(HT to Molly Gardner.)

Public Service Employee Unions are Different

Last night as I was entering the Madison College building to go to orchestra rehearsal I saw bus after bus, paid for by voluminous union money, unloading scores of union members with professionally printed signs to launch this protest against Gov. Walker's just-begun attempt to force state workers to accept reductions in pay and perqs. His plan is to strip most state employees of some of their collective bargaining rights, on the theory that this is what has so far blocked them from having to accept their share of the reductions that workers in the private sector have had to suffer.

In the angry comments on the plan, you could hardly guess that the downtrodden "workers" being discussed are government workers, and that the "unions" are public service unions only. However, they are, and it is very important to realize that.

We are not talking about the proletariat here. We are talking about people who have the power to tax: something the rest of us do not have.

If Walker were trying to break the back of private sector unions, I would agree that this is an atrocity of Hitlerian proportions. (Come to think of it, crushing the private sector unions is exactly what the Führer did, soon after taking office.) But I think private sector unions and public sector unions are completely different animals: economically, ethically, and politically different.

There is a powerful rationale for having private sector unions. Suppose you work in a competitive market, and you persuade your employer to raise your salary significantly. Your boss is competing with people who did not incur that particular expense. That is a reason, maybe a good one, for the employer not to give you the raise. If all the workers in your company bargain as one, that blunts this reason considerably. If all in your industry do -- so much the better! Now your boss will not have to compete against people who did not incur this expense.

Great! The discipline of competitive markets exerts a downward pressure on all business expenses, including employee salaries. Unions are anti-competitive devices, instruments of monopoly power, and thus highly attractive to those who believe that their bargaining position in a competitive market is weak.

With government employees this argument is completely lacking. You employer does not compete in the market. To give you more money, all they need do is take some more from the taxpayers, either present taxpayers or - better yet - future ones. (If they are a nation-state, they can just print it up!) People have often commented that public and private unions behave very differently. Private sector unions, they say, are adversarial, while public sector unions are "collusive."

Obviously, if you combine this with collective bargaining, you can get some inequitable distributions of benefits and burdens. For three years now, UW professors have endured a 3% cut in pay. Meanwhile, the K-12 teachers in the same community have experienced merely a lack of pay increases. Why the difference? The public school teachers are unionized and the professors are not. Why should the the K-12 teachers not experience their fair share of the pain? The private sector workers who must work to support them with their tax dollars are suffering losses, in some cases devastating ones. Government workers should not be a privileged aristocracy.

If to achieve this end we need to strip them in many cases of the "right" to collective bargaining, then so be it.
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Update: Here Jonah Goldberg argues that the real reason for public sector unions is not, and never was, based on considerations of justice or fairness: The actual reason is purely political. See also this.

Tough Love from the Debt Commission

Neal has a point. I've seen a lot of moaning about these recommendations from all over the political spectrum. Nancy Pelosi has said "This proposal is simply unacceptable" (of course!), and various right-wingers have denounced it as well. As a whole, it seems to me as sensible as a dictionary. Below I've listed a selection of their recommendations, all taken from here.

My favorite, other than taking the Office of Safe and Drug-Free Schools out behind the barn and killing it with an ax (that stuff is no dam bizniz of the feds anyhoo), is slashing our overseas military presence by one third. Why on Earth should the American taxpayer be providing a large portion of the national defense of big, strong, grown-up countries like Germany, South Korea, and Japan? Can't they tie their own shoes and wipe their own butts by now? Sheesh.

Unless we do something like what's on this list, we will soon be living illustrations of Maggie Thatcher's great aphorism, "The problem with socialism is sooner or later you run out of other people's money."

Social Security cuts:

• Index the retirement age to longevity -- i.e., increase the retirement age to qualify for Social Security -- to age 69 by 2075.
  
• Index Social Security yearly increases to a lower inflation rate, which will generally mean lower cost of living increases and less money per average recipient.
  
• "Increase progressivity of benefit formula" -- i.e., reduce benefits by 2050 for middle, and, especially, higher earners, relative to current benefits.
  

Tax reform:

• The co-chairs suggest capping both government expenditures and revenue at 21% of GDP eventually.
  
• They suggest reducing the tax brackets to three personal brackets and one corporate rate while eliminated all credits and deductions. Without any credits or deductions (including the EITC and mortgage interest deductions), the 3 tax rates would be 8, 14 and 23 percent.
• Eliminate the mortgage interest deduction.
  
• All their proposals limit Congress to collecting taxes on income made within the United States, reducing or eliminating taxes on American expats and revenues companies earn abroad.
  
• They also suggest raising the federal gas tax by 15 cents per gallon.

Medicaid/Medicare cuts

• Force more low-income individuals into Medicaid managed care.
  
• Increase Medicaid co-pays.
  
• Accelerate already-planned cuts to Medicare Advantage and home health care programs.
  
• Create a cap for Medicaid/Medicare growth that would force Congress and the President to increase premiums or co-pays or raise the Medicare eligibility age (among other options) if the system encounters cost overruns over the course of 5 years.

Discretionary spending cuts

• Eliminate all earmarks.
  
• Eliminate the Office of Safe and Drug-Free Schools.
  
• Freeze federal worker wage increases through 2014; eliminate 200,000 federal jobs by 2020; and eliminate 250,000 federal non-defense contractor jobs by 2015.
  
• Require the Smithsonian museums to start charging entrance fees and raise fees at the national parks.
  
• Eliminate funding to the Corporation for Public Broadcasting.
  
• Reduce farm subsidies by $3 billion per year.
  
• Merge the Department of Commerce and the Small Business Administration and cut its budget by 10 percent.
  
• Cut the State Department's overseas budget by 10 percent by 2015; reduce the proposed foreign aid budget by 10 percent in 2015; and cut voluntary contributions to the United Nations by 10 percent in 2015.
  
• Eliminate the Overseas Private Investment Corporation, which provides subsidized financing and political risk insurance for U.S. companies' investments abroad.
  
• Cut $900 million in fossil fuel research funds.
  
• Force airlines to increase their contributions to airline security costs and allow them to increase per-ticket security fees.

Defense spending cuts:

• Double the number of defense contractor positions scheduled for elimination from 10 percent of current staff augmentees to 20 percent.
  
• Reduce procurement by 15 percent, or $20 billion.
• Cancel or reduce various military vehicle or weapon programs now in development.
  
• Reduce military forces in Europe and Asia by one-third.
  
• Send all military children based in the U.S. to local schools.

The report also recommends tort reform as a way to reduce Medicare and Medicaid expenditure

Our Well-Informed Electorate

Can you distinguish between a Keynesian and a Kenyan? Then you know more than these pitiable and dangerous fools, who showed up a the "Rally for Sanity" to support Obama, but obviously haven't taken the trouble to do any serious thinking about the great issues of the day. I say they are "dangerous" because their vote counts just as much as yours does.

Think about that!

The Contemptible George Bernard Shaw

I saw a performance of Shaw's Major Barbara(1905) in Spring Green Wisconsin Friday night. What a charming production it was! And what a colossal jerk and fool Shaw was!

The great H. L. Mencken, author of the first book on Shaw ever published (1901), later wrote a classic essay on Shaw called "The Ulster Polonius" (August 1916). In it, he wondered how Shaw's pamphlets and play "kicked up such a pother" despite the fact that that, like most plays, his works consisted mostly of platitudes (a thesis Mencken also applied to the plays of Ibsen). Why all the fuss, he asked? The answer, he said, was fairly simple. “[Shaw] practices with great zest and skill the fine art of exhibiting the obvious in unexpected and terrifying lights.” Nearly all of Shaw's premises, despite his horrific tone, were really "bulletproof."

Viewing the denouement of Major Barbara, I could only wonder what premises HLM was thinking of. Adolphus decides to take over Undershaft's munitions factory because he has decided that the only way to really improve the world is to kill off the privileged elites. His fiance, Barbara, gives up working to save the souls if the poor, on the grounds that poor people can't be sincerely interested in virtue and goodness. From now on, she will preach to the comfortable inmates of Undershaft's manicured company town.

Bulletproof? Bah! Both their ideas -- that of Barbara as well as that of Adolphus -- seemed to me obviously wrong. As the last act slowed down to make Shaw's didactic points, I made a mental list of other things that Shaw was either obviously or demonstrably wrong about:

We should all be comfortably prosperous, because that will free us to be good. This will surely happen if the government micromanages the entire economy. The Soviet experiment is a good example of this and will succeed. Meanwhile, the unfit and feeble-minded should be "humanely" put to death (see above video).* And nobody should be vaccinated. By the way, the Americans should abolish their constitution because it prevents the "good" FDR from doing more or less whatever he wants.

It can't be a coincidence that one man was so consistently, horribly wrong about so many important things. There must be some explanation -- maybe some killer premise that implies all the rest. I don't know enough about Shaw to say what the explanation is, but something tells me there has to be one.
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* On the other hand, Shaw was a vegetarian because he did not want people to "murder" innocent pigs and chickens.

Harvey Pekar: Long Live the Crappy Government Job!

Saddened to hear of the death of Harvey Pekar, writer, raconteur, and subject of the brilliantly innovative HBO movie, American Splendor (2003), I've been watching my DVD of the movie again. Here's a thought you won't read anywhere else:

This time around, this movie strikes me as a window on a rapidly receding past. Note that the crappy job Harvey's stuck in -- and pathetically grateful to have -- doesn't even exist any more: taking care of paper files in big metal drawers and yards of metal shelves in the basement of a government hospital. Nowadays that stuff is all on computers, and the job would go to a somewhat more skilled person.

When I was a hippie, I knew longhairs who worked for the Postal Service, not because they felt a calling to wear shorts and carry bags full of Sears catalogues, but because the USPS didn't care if you had long hair. Their customers may not have liked it, but as a government bureau they didn't have to please their customers.

This is the niche in the socio-economic system that Harve occupied. The film begins with the real Harvey telling us that he has always worked at sh*t jobs, lived in sh*t places, and with women who treat him like human garbage. A lot of the charm of the film, and of Harvey's books, is enjoying the ironic tension between a) his intellectual brilliance, b) the gritty crappiness of his immediate surroundings, and c) the gross, obvious character flaws that bring about (b) in spite of (a).

Has anyone noticed the contribution to our culture that was made by that vanishing institution, the crappy government job? Here is a guy with a set of skills and interests that are not highly marketable (jazz critic, expert on comic books and the kind of blues records that only eccentric white people listen to any more) and massive failures of patience and self-discipline that prevent him from getting very far with his formal education (otherwise he might have pursued his goofy obsessions in a university and actually gotten paid for it).

How to avoid a life of utter frustration? One classic solution, admittedly imperfect, was the undemanding but unrenumerative government job (or UDURGJ for short). It enabled a person like Harve to go home at the end of the work day, his mind un-cluttered by any complex or worrying problems like the ones that come up in other people's work day, and un-exausted by any backbreaking physical labor, free to pursue his private obsessions as just that -- private. Meanwhile, the UDURGJ makes it possible for Harvey to make a real contribution to the economy and to be remunerated in a way that is appropriate to his meager contributions (ie., not much). The arrangement is meager, yes, but honorable.

From what I have read, this sort of job seems to be vanishing fast. Thanks to increasing unionization, more and more government jobs have better pay and much, much better perks than similar jobs in the private sector. (Not to mention that precious government job security!)*

Maybe you are thinking, what's wrong with Harve getting better remuneration? Wouldn't that be a good thing from his point of view? Well, I don't think so. If you take the UR out of the UDURGJ, I doubt that this job will go to someone like Harvey. If the job is really worth a lot, it will attract people who are a lot more marketable than him. Why would anyone, even the government, hire someone with Harvey's obvious emotional problems, character flaws, and complete lack of credentials, when for the same (exorbitant) price they can get someone who is a lot more bright-eyed and bushy-tailed? Those unions must be pricing guys like Harvey right out of the market.

With the disappearance of the crappy government job, we will lose a haven for dreamers, misanthopes, and misfits, for the stunted, the botched, and the mangled-by-life. I don't know about you folks, but that describes some of my favorite people. As a recovering hippie myself, I will miss them!


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* News flash: I just heard an interview with the mayor of San Jose CA, on why they are firing their (unionized) city janitors and hiring private (but also unionized) ones: the government ones cost twice as much as the private ones. Their government janitors get about $80,000 a year [including perks] plus about 17% "for time off" [now there is an interesting concept!], or just under $100,000 per year, or around $50 per hour. That's fifty bucks for an hour of buffing the floor and swabbing the toilets.

The Real "Greek Tragedy"

Way back in 1965 I sat in a lecture audience and listened to leftist philosopher Herbert Marcuse, at the time a professor at UC San Diego, argue that car names tell you a lot about the evils of capitalism: cougar, jaguar, mustang, barracuda. So many of them are named after violent or dangerous animals! These are the sorts of names that sell cars, because capitalism turns us into the sort of people to whom such things are attractive: it turns us into dangerous, violent beasts!

(Little did I know that this would remain for more than four decades the stupidest argument I would ever hear from a professional philosopher.)

And what would the alternative sort of society do to our character? I imagine that the Sage of San Diego thought that when the people of a country are forced to share just about everything, like members of a family share just about everything, then the country would be like one big family, and people would pull together. They wouldn't be so anti-social and selfish.

If you look at Greece this week, you will see what sort of character is actually fomented in an advanced welfare state. The bill for the Greek welfare state's lavish "benefits" -- "free" health insurance for all, "free" school through college, lifetime pensions at full-pay for government workers, enormous stretches of paid vacation every year -- is due, long delayed by irresponsible deficit spending. The government has to cut benefits and raise taxes in order to get bailout money from America and Europe.

Are the recipients of these benefits taking their share of the costs and pulling together like one big family in hard times? As you can see in the above video, that is not the response at all. The rioters have been reacting to the austerity measures with murderous rage.

Why? Well, consider the euphemism that Americans have chosen to substitute for the unpopular term, "welfare state": entitlements. If you have an entitlement, then with all the force of a tautology, you are entitled to it. An entitlement is a right.

As far as the truth of the matter is concerned, this word is like most euphemisms: vague, confusing, and dishonest. Obviously, these things are not rights in the sense that life, liberty, and the pursuit of happiness are rights. Psychologically, though, this one is very revealing. The public school teachers you see in the above video are reacting exactly as if the government were violating their rights: they are getting into fistfights with the police.

Unlike life, liberty, and the pursuit of happiness, entitlements are rights to stuff, stuff that had to be produced by another person. An entitlement is a right to the fruits of the labor of others.

I hold that the very idea that a able-bodied human beings who are perfectly capable of fending for themselves have such a right is profoundly corrupting in its influence.

Entitlements create entitled people.

Here in the US, it seems that the states with the most lavish welfare-state spending are the ones in which the consumers of tax dollars are the least willing to accept cuts or, in some cases, even a freeze in pay raises.

The great Mike Royko once suggested that Chicago's old motto, Urbs in Horto ("City in a Garden"), should be replaced with Ubi Est Mea ("Where's Mine?"). It looks like this phrase expresses the true soul of the welfare state as well: Where's mine?

GM Commercial: Is this a Lie?

Here is an interesting philosophical question for you. Is this commercial a) misleading, b) deceptive, or c) a bare-faced lie? I'm wavering between b and c.

In it, the CEO of General Motors argues that the massive TARP loans made to them last year by the Obama administration (with money dedicated by congress to bailing out banks, not car companies) were not such bad idea after all, given that they have now paid them back, in full, with interest, and five years early. When I heard that, I thought what millions of others thought. GM must have made a miraculous recovery and paid the taxpayers back with money they had earned from their customers. CBS news described the White House as "exulting" in the fabulous news. And no wonder!

Except that this is not what happened at all. As revealed in testimony before the Senate Finance Committee the day after all the exulting began, what GM had actually done was to take billions from another fund of taxpayer money, held in escrow for GM by the Treasury Department, and simply transfer it to another account. This was explained yesterday in a well-reasoned, gentlemanly letter Sen. Charles Grassley (R-IA) sent to Treasury Secretary Geithner. (His letter has for some reason disappeared from the senator's web site, but you can read the full text in this blog post.)

It's possible to deceive people by means other than lying. To lie, you must make a statement that is false. This man, and the exultant administration, are lying if you judge that what GM did doesn't not count as a "repayment." After all, if the taxpayers were payed by in effect taking even more money from them, they are no more solvent than they were before. In fact, the wording of Grassley's letter suggests that the money in the escrow account is loot GM has no legal obligation to ever give back to the taxpayers, so what they are doing sounds more like a default than a repayment.

On the other hand, you might decide that, by state decree, the money in that escrow account is legitimately the property of GM, so that they really are repaying the taxpayers, though with money that used to belong to them.

However, as I've said, it is possible to deceive people without overt lying. You are being deceptive if you make a statement on the basis of which a reasonable alert, reasonably trusting audience will believe something that is false. I and millions of others did believe something false on the basis of this ad. You are dishonest if you are deceptive in a way that is morally wrong. Your deception is morally wrong if you are doing it in order to gain at the expense of the deceived person.

It seems to me that, by these definitions, this ad and the exultant administration spokespersons are being both deceptive and dishonest. Not only are they being deceptive but if we remain deceived about this goofy shell game then in the long run they gain and we lose.

By the way, I love the title of this commercial: "Trust."

(Developing: Go here and scroll to 2:18, and you can see Obama earlier today repeating GM's lie, or whatever it was, word for word. For an account of the real reason GM paid the $6.7 billion loan now rather than later, look at this. No, it's not a nice reason.)

Government is Unfair

Here is my old friend from my days as a Minnesotan, Danny Shapiro, talking about his critique of the welfare state (sadly, this video is not embeddable). His thesis: just about every welfare state policy is inferior to some alternative, even by the standards of those who advocate such policies, including the standard sometimes known distributive justice (or "fairness").

A glaring example, possibly different from the sort he cites, just popped up in a Madison WI newspaper.

First, a word of explanation. One way to grasp the idea of distributive justice is to think of the phrase from The Communist Manifesto, "to each according to his ____." How you fill in the blank varies -- according to his moral virtue, talent, contribution to society, effort, or maybe (Marx and Engels' favorite) need -- but the basic idea is that your wealth, income, or whatever, ideally ought to be part of an ordered response to characteristics people have which indicate that they "deserve" the income, etc. Discussions of distributive justice commonly take place with the following sort of background assumptions: There is little chance that free markets will conform to any of these ordered patterns. If distributive justice makes sense, then the government should step in and fix the situation. The question is whether it does make sense and if so which form is the best (to each according to his ... what?). That is how Robert Nozick discusses it in his classic Anarchy, State, and Utopia (1974).

People seldom ask whether government itself is distributively just. Take a look at this list of the 20 highest paid municipal employees in Madison WI last year:

John Nelson, Bus driver, $159,258

Dean Brasser, Comptroller, $151,551

Noble Wray, Police chief, $143,585

Michael May, City attorney, $143,434

Carolyn Hogg, Assistant city attorney, $138,084

Mark Olinger, Planning and Development director, $136,787

Randy Gaber, Assistant police chief, $136,248

Debra Amesqua, Fire chief, $136,163

John Davenport, Assistant police chief, $134,382

James Keiken, Assistant fire chief, $133,589

Michael Dirienzo, Assistant fire chief, $133,144

Paul Bloom, Assistant fire chief, $132,873

David Dryer, Traffic engineer/parking manager, $130,831

Tom Carto, Overture Center president, $129,566

Carl Gloede, Police Captain, $128,750

Katherine Noonan, Assistant city attorney, $126,709

James Hess, Monona Terrace director, $126,593

Roger Allen, Assistant city attorney, $126,592

Brad Murphy, Planning unit director, $126,363

Greg Tatman, Bus driver, $125,598

Note that two of them, #20 and, astoundingly, #1 are ordinary city bus drivers. Mayor Dave Cieslewicz did not earn enough to make it on to this list. Now, I'm not anti-bus-driver (my grandfather drove a bus in Detroit MI all his working life) but surely there is no sane version of the distributive justice idea that can justify this arrangement.

The above-linked article, by the way, explains why this odd distribution of income happened: Bus drivers, unlike mayors, are unionized, and the Teamsters got the municipal bus drivers a contract with lavish pay for overtime, and apparently no limits on how much overtime any one employee can accumulate. The article also mentions that this situation last came to John Q. Public's attention in1998, when it caused a bit of a flap. Obviously, the resulting public ire had absolutely no effect on the situation during the twelve long years that have crept by since then.

I draw two conclusions:

1. Government can be distributively unjust, even absurdly so.

2. It can be very, very difficult for John and Jane Public to do a damn thing about it.

The Real Ruling Class

Is there a ruling class in our world? Surely, there have been castes or classes in the past, with some ruling and extracting the product of the labor of others, while others must obey and be exploited.

Marxists say there is such a class and that it is the capitalists. Others think that insofar as the power of capital rests on voluntary market transactions, the ideas of "ruling" and "exploitation" do not really apply here. Others look for more mysterious, hard-to-see rulers. Who really rules us? Is it the Trilateral Commission? The Jews? The Bavarian Illuminati? Each theory is more arcane than the last.

I think the answer to the question is the one that is right under your nose. Consider the very words, "ruling class." Who literally rules you? Who has the power de facto to extract wealth from you without your consent and even against your wishes?

The answer of course is the state, the government and its employees (see also the above graph, click to enlarge). For most its history and prehistory, the human race has lived in stateless societies, in conditions that were very primitive but also very equal. With the birth of the state, extreme political and economic inequality comes about. Primitive states were often frankly wealth-extraction devices and had virtually no other declared function. Modern states have evolved considerably and, I admit, do some things that are for the common good.

The wonder of it is that, though this answer is screamingly obvious, it is almost never given. Looking to see who the real overlords and masters of the Earth are, people consider everything but the obvious.

My point here is not (yet) to judge or blame. Maybe these people deserve all this wealth and power. My point here is the irrefultably obvious one: that they do indeed have them, staggering amounts of them, and that they are gaining on the rest of us day by day.

Beyond that, my only point is that we probably should not give them any more than they already have. It is in this context that I view the health care reform bills now before congress. Any one of them would surely be one of the largest gains in government power in the history of the republic.

I Attend a "People's Town Hall"

That's what they are calling them. In areas, like mine, where the representatives in congress are refusing to meet with the people, some folks are hiring halls and inviting them -- and bringing in their own speakers. I attended one in Madison WI last week.

An organization called Americans for Prosperity brought John Stossel in to speak, and invited Representative Tammy Baldwin and both our senators to speak. None of them responded.

I got there almost half an hour early, and already the huge Mariott parking lot was full. I parked next door. All around me were people walking toward the conference center. On my left was a young blond woman in leopard-patterned toreador pants and high heels. On my right, a middle aged guy in a baseball cap. I have been to many political rallies and demonstrations, beginning in 1964, but they never had people who look like this.

Who are these people, I wondered? During the event, one speaker asked, "How many of you own a small business or work for a business of 50 employees or less?" About half the room raised their hands. How many of you have never been to a political event before the past year?" Over a third of the audience raised their hands.

That speaks volumes about who these people are and why there are here. A business man on the panel that spoke after Stossel said that the business community is deeply divided on Obamacare: "It's not a left versus right thing. It's a big versus small thing."

Here are my notes on Stossel's talk:

There are portions of our medical system that are still in the free market system [that we began to destroy in the sixties.] Plastic surgery is free market, and it is cheap, efficient, and constantly improving. Doctors in that market give patients their phone numbers and emails. Do you know your doctor's email? When we made a documentary about the Canadian medical system, we found a clinic that was open 24/7. But you had to be a dog or a cat to be treated there. In Canada, veterinary medicine is still private. And it works fine.

Why is Obama only talking about insurance, as if that were the solution? Insurance is the lowest form of capitalism. It's a third payer system. The insurance mentality is actually the problem.

Because it is a third payer system, you don't usually even know what your care costs. If you did try to pay for it, the exchange might go like this:

"How much does this procedure cost?"
"$400, but why do you care?"
"Wow! Does it really have to cost that much?"
"What difference does it make?"
"Well, I was thinking of paying for it now."
"Now? You mean, like, today?"
"Yes."
"Okay, $150."

Insurance should be catastr0phic only. There should be high deductibles. The result would be that you would be spending your own money on your medical care. Nobody spends your money as carefully as you do. The result would be a dramatic reduction of costs.

But Obama says you shouldn't have to pay anything: he thinks deductibles are just wrong. He is going in exactly the right direction.

There should be no government mandates. One reason insurance is so expensive is that governments force insurers to provide services you may not want to pay for. In Wisconsin, you can't buy medical insurance without paying for other peoples' chiropractic treatments. If you could buy insurance from other states, you could escape from doing so. But that is one more thing you are not allowed to do.

[Personal note: I had a lengthy experience with chiropractors when I was young. I have regarded them ever since as charlatans on a level with Medieval bloodletters. Forcing me to pay for their services is an injustice similar, given my values, to forcing me to pay for abortions. Of course, the justice or injustice of it is not what Stossel is taking about.]

Here is a small businessperson (a baker) from Sonoma County at a regular town hall in Northern California:

Government Failure

As you probably know, this girl was kidnapped by a creep who claimed to be able to speak to creatures in another dimension. He kept her in a compound in his backyard in Antioch California and subjected her to eighteen years of unspeakable treatment.

During that time, the authorities failed despite many opportunities to discover the crime. Their failure was so grotesque that the Antioch police department took the extraordinary measure of issuing an apology without waiting for the usual internal review. I suspect that he was eventually caught (by the UC Berkeley campus police, of all people) because he wanted to be caught, thinking that he would be rewarded for his crimes with world fame. Which of course he was.

In 1853, Herbert Spencer published an essay, "Over-Legislation," in which he showed how incompetent, inefficient, and just plain cruel government is when it works outside its proper sphere of operations. He then examined the way it works when it stays within its proper sphere: for instance, when it tries to catch criminals.

In 1935, Albert J. Nock put Spencer's point like this:

He shows ... that the State does not even fulfill efficiently what he calls its “unquestionable duties” to society; it does not efficiently adjudge and defend the individual’s elemental rights. This being so – and with us this too is a matter of notoriously common experience – Spencer sees no reason to expect that State power will be more efficiently applied to secondary social purposes. “Had we, in short, proved its efficiency as judge and defender, instead of having found it treacherous, cruel, and anxiously to be shunned, there would be some encouragement to hope other benefits at its hands.”

If government were really efficient at catching criminals, then we might have some semblance of an excuse for giving it control of the entire medical care system. But it isn't, and we don't.

Of course, this is one extreme case, and nothing follows from it by itself. But in a rational person, cases like this don't work upon the mind by themselves. You reflect on them.

Consider why things like this happen in the first place. What would happen if, every time the Antioch police department made a mistake, they lost money? What if, in the event that they made a mistake as loathesomely horrific as this one, they would lose so many clients that they would be driven out of business? That of course is the situation of organizations in the private sector, whether they operate for profit or on a not-for-profit basis. Precisely because they can only get money from people with their individual consent, the market punishes them for every mistake they make.

That is one reason why Spencer's rule is true, and one reason why any given task should only be given to government if it must be carried out and there is simply no one else to do it.
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BTW, for more on Spencer, the first libertarian individualist to be slimed by the left, go here.

Obama's UPS and Fedex Argument

This is an attempt to answer the "you can't compete against the government" type of argument that I gave the other day.

Not only does it not answer the version of the argument I was giving, it actually supports my case.

My argument was that, because government bureaus have the power to tax, they will have a larger share of the market than they deserve in efficiency terms, and that this is bad because it results in the service being inefficiently provided overall.

First, these three companies must be comparable in terms of quality of service and cost to consumer, or one of them would be out of business. But the PO needs periodic subsidies from the government (the "trouble" Obama says the PO is always having) in order to compete at all. So it is an inefficient provider, compared to the other two.

Does it have the tiny market share that that an inefficient provider deserves? Of course not. In my village, the PO has its own building, and customers are always there. Fedex and UPS share a part of the local box 'n' ship store, and when I go in no one is ever there.Obviously, there is colossal waste going on here. Quid erat demonstrandum.

Further, if ObamaCorp had a market share similar to that of the PO, it would be truly gigantic. Its creation would represent a change in America of staggering proportions. The town hall demonstrators are right to be yelling.

Obama keeps saying we need ObamaCorp to "keep them [ie., the over 3,000 private medical insurance companies] honest." But in his example it obviously is the two private companies that keep the government delivery service honest, not the other way around!
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Here is Lew Rockwell's take on "Obama's slip/gaffe/admission."

The Public Option is a Trojan Horse: Reason #2

Yesterday, I explained a reason why the health insurance "public option" in American Affordable Health Choices Act of 2009 is a Trojan horse that is likely to result in most Americans, like it or not, being dumped into the hands of the government. It had to do with the fact that the some or all of the costs of this service would be transferred, by means of taxation, onto people other than the individual consumer, making the cost to them relatively low. Thus the government insurance company would tend to crowd out the private ones.

According to this study there is another reason it would tend to shove private health insurance out of the picture. It has to do with the way in which the plan would combine government medicine with a certain feature of the present system, a feature that the study describes like this:

In today's system, hospitals and physicians provide a substantial amount of free care to uninsured people called "uncompensated care." Also, payments for Medicare and Medicaid are usually less than the cost of the services provided resulting in payment shortfalls. Hospitals and physicians cover the cost of uncompensated care and payment shortfalls under public programs by increasing charges for private health plans in a process known as cost-shifting.

Since we can expect the "public option" -- a vast expansion of Medicaid -- to continue the same pricing policies, this will shift further costs to the shrinking number of people who still have private health insurance. This of course would increase the price gap between public and private insurance, driving even more people into the government medical system.

I expect the result would be a system in which the majority have crummy medical care but at low cost to them (until tax time) and a wealthy minority have much better care -- maybe something very much like the sort of care that most Americans have now.

This is why the town hall protesters keep mentioning the fact that members of congress will not be taking the public option for their own medical insurance. They all have private insurance now, and they are too wealthy to be driven into our part of the system.

Isn't it ironic? If you believe in equality and "fairness," the ideas the drive government health systems, you ought to be against this one!

Yes, the "Public Option" is a Trojan Horse

One of the many pieces of disinformation floating around about the the American Affordable Health Choices Act of 2009 -- the House health care bill that everyone is screaming about -- is that critics of the bill claim that the bill, or Obama himself, would "ban" private health insurance. As far as I know, no one is saying this. The actual objection is more complicated that this, and as far as I can see it is true. It is that the economics of the plan itself will tend to systematically crowd private plans out of the marketplace.

These are the relevant provisions of the bill:

1. It would require all Americans to have health insurance.

2. It would expand the Medicaid program to cover all adults with incomes below 133 percent of the federal poverty level (FPL) ($29,300 for a family of four), and provide premium subsidies for people living between 133 percent and 400 percent of the FPL (i.e., $88,000 for a family of four).

3, It also requires most employers to contribute to the cost of coverage for their workers.

4. The bill also establishes an “exchange” that presents a selection of health coverage alternatives including a newly created public plan that would compete with private insurers for enrollment.

One reason this plan will tend to crowd out private health insurance is obvious to anyone who is used to thinking in terms of business and economic principles. My father was a small business man, and the first business principle I can remember him telling me, when I was about ten years old, was "you can't compete with the government." The main reason this grundsatz is true is not, of course, that the government is more efficient -- producing more benefit per unit of cost -- than you. It is that it has a way to hide its costs from the consumer: you can only charge people for services, but it can tax them.

As you can see from #2 above, the new system will give its product to a lot of people for free. It will also be able to -- and of course, will -- sell its product to a lot of other people at a below-the-market price. This will result in an avalanche of customers out of the private insurance market and into the public option, since they will be able to get roughly the same services at lower cost (to them).

The avalanche will be multiplied by the fact that about two thirds of Americans with health insurance get it through their employers. Your employer decides what your insurance options are. Under the plan, employers will have powerful incentives to take employees who now have private coverage and simply dump them into the cheaper (to them) public option. This study by the Lewin Group estimates that the new system would very quickly result in almost half of covered Americans losing their private health insurance. (They also estimated that if the feds imposed medicare-style price controls and opened the public option to everyone, the number of Americans who depend directly on the government for their medical care would rise from about one quarter to two thirds.)

This would mean that Obama's oft-repeated claim, "if you like the insurance you have, you can keep it," is a gross falsehood.*

"But all you are saying, really, is that the public option would tend to out-compete the private one. What's wrong with that? Aren't you in favor of competition?"

The answer is that competition is only a good thing, ordinarily, because the consumer has to pay the producer's costs. Since the consumer is looking for the best deal, the result is efficiency: most benefit per unit of cost. If the producer can shove costs onto others, the result is inefficiency. The result is a rising dollar cost that is only felt at tax time -- and reduced services, reduced quality, under-capitalization, and a lot more time spent waiting in line.

This sort of "competition" lures rational agents who are looking for the best deal into a situation that on the whole is far from the best.




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* According to an AP story dated June 15, 2009, the White House stated that these words, repeated endlessly, "should not betaken literally." See footnote 18 of this report.

Of Broken Windows and Crushed Clunkers

The "popular" Cash for Clunkers program (as popular as throwing money in the street and watching people scramble for it would be) is the most clear, sparkling, perfect example of Bastiat's broken window fallacy since the dark days of the Great Depression. I was wondering whether I should do the heavy lifting involved in making that point when I saw this column by Jonah Goldberg, which makes it very well. Now I don't have to. Thanks Jonah! Here's his column:

Ce qu'on voit et ce qu'on ne voit pas.

That may exhaust my French phrase quota for the year, but it's worth it. The saying is the title of an essay by the 19th century French economist Frederic Bastiat and means "that which is seen, and that which is not seen."

Bastiat's essay is most famous for the "parable of the broken window," in which a young boy shatters a shopkeeper's window and, after some initial outrage, the villagers conclude that the rascal helped the local economy. Why?

Because if no one broke windows, then the window makers would be out of business, and if the window makers were out of business, they wouldn't buy any more bread or shoes, hurting the bakers and the cobblers. So the six francs the shopkeeper must shell out for a new window is really a boon to the community.

The problem with this argument can be gleaned from the title of Bastiat's essay. By counting the money the shopkeeper spends to replace a perfectly good window (that which is seen), we ignore the money he might have spent on something else (that which is unseen). The shopkeeper might have instead dropped six francs on new shoes or a book or on a bonus for his assistant. Those who celebrate the broken window as a generator of growth take "no account of that which is not seen."

Sorry for what may seem like a long digression, but the parable of the broken window is worth keeping in mind, perhaps even updating, to the parable of the crushed clunker.

This parable is more convoluted, but the upshot is that Uncle Sam pays people to destroy their own cars as long as they use the money to buy a new, more expensive car.

As you've no doubt heard, the "cash for clunkers" program gives buyers up to $4,500 of taxpayer dollars toward the purchase of a new car, if they trade in their old cars for vehicles with better gas mileage. The old cars, still roadworthy, are then destroyed just like the shopkeeper's window.

The thinking behind the program is that the car companies need a boost, Michigan needs a boost, the environment needs a boost (through lower emissions) and Americans need help too.

Unsaid, but just as relevant, is that the authors of the government's mammoth stimulus plan need some proof that something is being stimulated.

So this scheme is win-win-win-win. Within days, the $1 billion that was supposed fund the program through at least October was used up as consumers, most of whom had been waiting to trade in their old cars anyway, took advantage of the free-money program. Indeed, Washington is agog with its own success, stunned to discover that Americans like getting free money.

That this news shocked so many on both the right and left shows how thick the Beltway bubble really is.

Like the drunk who only looks for his car keys where the light is good, Washington can only see the economic activity it has created, not the activity it has destroyed.

For starters, who says the smartest thing for people with working cars is to buy new ones? Indeed, because personal debt is supposed to be a problem, why not look at this as bribing consumers into taking out car loans they don't need? Even with the $4,500 subsidy, not all of these customers are going to be paying cash upfront for their new cars. So they'll be swapping serviceable-but-paid-for cars for nicer cars that are owned by the banks.

Besides, maybe some people would be smarter to buy a savings bond or max-out their kid's college fund or -- here's a crazy thought -- buy health insurance. But instead they've been seduced into spending the equivalent of their six francs on a car they don't really need.

But, you might say, some buyers surely do need a new car. True enough. But if they need a new car, they'd get one anyway, eventually. Indeed, they might already have gotten it, but rationally opted to wait for the program to kick in.

Or they might have needed to wait until next year or to buy a more affordable carbecause the normal trade-in for their clunker might not be as generous as Uncle Sam's $4,500. They might even have opted for a cheap used car, which will now become more difficult for poor people to find because we are taking all these cheap cars off the market.

But at least, under these scenarios, they'd be spending their own money.

Under the government's program, my tax dollars are being diverted to people with cheap cars so they can buy expensive ones. That's just really inefficient wealth distribution, not wealth creation. But government can see it, and that's all that counts.

My Brush with "Universal" Health Care

A number of people have wondered why Natasha Richardson died of an injury (a slow epidural hemorrhage ) that is relatively easy to treat if caught in time.

I am struck by several other curious facts. It took 2 1/2 hours to drive the stricken actress to the nearest trauma center, in Montreal. Drive? What happened to the medical helicopters I so often see flying overhead here in Oregon, WI? And why did they have to go to a city of several million inhabitants to find a trauma center? I also notice that as part of her treatment she was then flown to New York City. (Hat-tip to Bill Anderson and David Kramer for these facts.) Why did part of her care involve being hustled out of the country in a coma?

Let me tell you another story, from my own experience. It happened two years ago, and I haven't written or even talked much about it because it is upsetting and I didn't want to violate the privacy of certain people. But this morning, thinking about Richardsons's untimely and possibly completely unnecessary death, it seems like a story that I should tell.

I was in Genoa, Italy, staying over after a conference to visit some academic friends. I visited one friend, Flavio Baroncelli, in the hospital, in the company of another (call her Laura). (Laura was formerly a student of Flavio's.) He had been suffering from cancer for years. I am very glad I went there to, in effect, say goodbye to him, but the visit was deeply disturbing in all sorts of ways. Though he was dying they had stuck him in a small, bare, cramped room, and with a roommate. The roommate made it abundantly clear that he resented our presence as Laura and I talked to Flavio and his wife. He kept frowning and rattling his newspaper as he turned the pages. I got the impression he really wished Flavio would die quietly and alone.

Flavio's mental condition was if anything more frightful that his physical state. Though he had suffered month after month of terrible, chronic pain, the doctors still refused to give him morphine. His wonderful mind, battered by this unceasing torment, was a wraithlike shadow of its former self. He had been writing a book about his hospital ordeal on his laptop (I think it would have been his fourth book), but had given it up for lack of ability to concentrate. Chronic pain debilitates the mind, as bleeding wounds do the body. As he sat on the edge of his bed, telling us the the tangled tale of his struggle with his illness, his anguish was palpable. Laura was in tears.

A few years earlier, he had gone to a special clinic in Arkansas. At first I thought I had mis-heard him but, yes, Arkansas has a clinic that is a world leader in treating the sort of cancer he supposedly had. When he went there, though, the American specialists found that his Italian doctors had mis-identified his cancer. It wasn't the sort that they treat so well there. But at least he did manage to write a book about his American trip, a meditation on the US slipping into its neocon madness under Bush II.

To get away from the roommate, we gathered Flavio's IV bottle and I helped him down the hall to a sitting room with rows of hard chairs. The whole facility was bare, ugly and devoid of ornamentation of any sort. It reminded me of jails and state mental hospitals I had visited back in the states. Someone had bashed a hole in the wall in the sitting room for no obvious reason, and no one had bothered to patch it up. Opposite us was an enormous window, apparently without drapes, facing the Mediterranean Sea. The glare of the sun on the water was burning a hole in my brain. In this Hellish place, even the life-giving sun was transformed into a torment.

All this while I kept remembering visits I had recently made to another friend in a hospital, one who had the good fortune to be sick in the United States. Her circumstances where similar to Flavio's -- a professor at a pretty good university with a life-threatening condition (in her case it was a stroke that left her severely brain-damaged) -- but her medical system by comparison treated her like she was royalty. Ensconced in a private room furnished lavishly with medical equipment, in a hospital that was carpeted and decorated like a hotel, she had plenty of medication (twelve prescriptions at one time) and all the care she needed -- above all, she never had to travel to another country, or even leave her mid-sized town, for any part of her treatment.

What really shocked me about the treatment my Italian friend got was the cruelty of failing to properly treat his pain. Laura later explained it to me as the result of a typically Italian attitude. Children who break a leg don't get pain-killers either. "It's a broken leg! It's supposed to hurt!" That, she said, is the attitude their doctors seem to have.

That may well be the attitude, but I suspect that it is an effect and not a cause. As is explained here, in a socialized system, like Italy or Canada, capital goods such as equipment and materials -- morphine, machines such as you find in a trauma center, helicopters -- have a different property status than they do in a private system. In the US, where you are allowed to charge people for using them, they are a source of income. In a socialized system, where you have to pay for them out of your budget but cannot charge anyone else, they are a pure cost. Hence such systems tend to be undercapitalized.* They'll give you morphine, but only when they absolutely have to. A few days after I left, they finally let Flavio have morphine. He died about three weeks later, mercifully out of pain at last.

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* Since the private system merely allows you to charge for use and does not require it, you will have the capital good on hand and available for charitable use, whereas in a pure socialized system the consumer will at times not be able to get it for love nor money. By the way, if you would like to make a brief visit to the World of the Politically Insane, take a look at the WHO ranking of health care systems, which was published around the time I visited Flavio. It ranks the Italian system second in the entire world. That of the US is 37th, two steps above that of Cuba.