How About Socialized Medicine?
Jude Wanniski
November 8, 1991


Even as The New York Times chides Moscow for not leaping faster toward a privatized market economy, it applauds Washington for leaping toward a socialized health industry. The White House reacts to the victory of Harris Wofford in Pennsylvania's Senate race by stepping up plans for health legislation that will march the United States briskly toward socialized medicine (especially after it is bid up by the Democratic Congress and the President caves in, as he did on the civil rights quota bill). Senate Majority Leader Bob (Balance-the-Budget) Dole, for goodness sakes, gets his picture on the front page of the Times this morning by announcing his support for national health insurance, which he sees as the Big Issue of 1992. The plan would cost a mere $150 billion over five years. What's going on here?

We are, in fact, seeing how a democratic country finds itself stumbling toward socialism, when its leaders refuse to practice capitalism. The pressure for socialized medicine is not coming directly from the masses, but from the business community, which is trying to escape from the crushing burdens of soaring employe health costs. Larry Hunter, chief economist of the U.S. Chamber of Commerce, tells me small businesses are terrified of the prospect that the government will mandate employe health insurance through a "pay or play" scheme, which would require businesses to either provide some level of health coverage or pay 6% -7% of payroll to the government, which would provide the coverage. Rather than swallow these costs, which would put a few hundred thousand small companies out of business overnight, the business community would advise their representatives in Washington to go for socialism. Hunter recalls that the American Medical Association fought medicare tooth and nail, but at a "tipping point" it switched to support, says Hunter. It's getting close to that point.

As if by coincidence, Sen. Lloyd Bentsen (D-Tex.) and Sen. William Roth (R-Del.) are co-sponsoring their scheme to hand out $300 in cash money to all the kids in the country, whether they need it or not. Blanket welfare without a means test is closer to being "communism" than simply "socialism." Canada, which has an economic mess on its hands even worse than we have here, has both socialized medicine and "kiddiegrants."

Karl Marx understood the fundamental flaw of a capitalist system is not in its economic component, but in its political component. When successful entrepreneurs become capitalists, they use their influence to gain control of the government. Their primary objective is to make life comfortable for themselves, by limiting competition at home and abroad. In doing so, they foul their own nest. Established business and labor, the special interests, gained the levers of power in 1968 with the election of Richard Nixon. They persuaded him to use tax policy to smother entrepreneurial activity at home, and monetary policy as a vicious form of trade protectionism, in that currency devaluation destroys the very fiber of society by corroding the links between effort and reward. There is no question but that the economic life of the nation is worse now than it was a generation ago. We've had a few solid years of wealth creation in the 1980s. Otherwise life has been getting marginally worse, inch by inch, most decidedly at the bottom. This is what gives rise to Jesse Jackson's remark that "Capitalism without capital is just an ism."

When the power capitalists foul their own nests, they are the first to confront demands for "social justice." The big guys at the top of the Fortune 500 are the first to offer income security, health benefits, guaranteed pensions, maternal leave, paternal leave, etc., etc. As soon as they do, they become active lobbyists to force these costs onto the business tier immediately below them. These in turn press for laws to require all businesses to do everything everyone else is doing. The "pay or play" schemes being advanced would reach the smallest enterprises, driving the most fragile out of business immediately. Do you have any doubt that if a "bipartisan11 health bill of this sort reached the President's desk it would be signed? The President might fuss about it for a bit, demanding this clause and that paragraph be altered, but in the end he would have a signing ceremony in the Rose Garden. In smiling attendance would be Senator Kennedy and Senator Dole.

This is the future for the United States as long as President Bush and his Establishment team remain on the course they are on. Budget Director Richard Darman now acknowledges that the budget deficit would have been much smaller if the capital gains tax had been cut two years ago, or a year ago, if only because of its effects on real estate and federal deposit insurance. These costs are trivial compared to the costs the nation would face under socialized medicine, which, unless tightly controlled, could chew up the nation's entire Gross National Product. Darman will be able to look back upon his tenure as having contributed zillions to the national debt! Maybe someday he will say he is sorry.

This is not to say I oppose socialized medicine. If the Power Elite will not permit the practice of capitalism in this country, I would have no choice but to support the redistribution of wealth away from the Power Elite to the poor, the sick, the homeless, the unemployed. In that sense, I'm a Marxist.

This is why I've been urging the political idea of targeting a $10 trillion economy in the shortest possible time. It will take one of the Democratic presidential contenders to fasten on that goal, as a way of surmounting the distribution arguments that have consumed the last several Democratic nominees. When the economy is growing by leaps and bounds through an explosion of entrepreneurial capitalism, the political pressures all work in the direction of privatization. The electorate withdraws its support of government services when economic growth occurs from the ground up instead of the top down. There is now enormous grass roots support for privatization in Chile and Mexico, for example. Chile has even privatized its Social Security system, an event that now seems beyond the wildest stretch of imagination in the United States, but which would happen with little resistance after a decade of rapid, grass-roots economic expansion.

We know the voters of Pennsylvania did not elect Harris Wofford because he promised socialized medicine. They voted against Richard Thornburgh as their only outlet to signal displeasure with the Hoover Administration now in place. The Beltway sees things the way it wants to. It's an insatiable maw, steadily guzzling the spirit and energies of the nation, awaiting the leader with the courage and wit to pull us out.