I’m going to divide this up into a bunch of different posts, partly because I don’t want to have to write it all at once and partly because dividing it up will make it easier to follow. Much of what follows is not simply my opinion, but rather the result of countless hours of research and investigation. I use mostly verifiable, independent, peer-reviewed sources and if I make an assertion, I’ll attempt to cite those sources so you can check them out yourself. Mostly I’ll be paraphrasing the relevant data, but when I quote another source directly, I’ll use italics so you know when that’s happening.

Another important thing to note is that I believe that we need to reform our health care system. I’ll state that again so there’s no misunderstanding, I believe that we need to reform our health care system. However, as I’m sure will be no surprise to regular readers of this blog, I don’t believe that the various proposals making their way through congress are the best way to go about it. Of course, we really don’t yet know what the final bill will look like, so we’ll just have to take an educated guess based on what is most likely to be in the final version and I’ll do that based on what President Obama has stated are his goals.

First, however, we need to take a look at what the problems are and what has/is causing them. Just like a competent doctor, we need to diagnose first before we can suggest the proper treatment. I think you may be surprised by this part because it could very well challenge some of your deeply held beliefs. When I first started my research, I thought I knew, but then those pesky little facts kept getting in the way.

I invite and encourage you to post your thoughts and reactions. I love a vigorous debate but there are a few ground rules. First, rudeness will not be tolerated, neither will demagoguery. No insults, name calling, or flame wars. We’ll leave that to the politicians. Second, it’s ok to state your opinion, but try to recognize that an opinion doesn’t qualify as fact. If you make an assertion, you should be prepared to back it up with some verifiable source and “Sicko” doesn’t count. Neither does Fox News, or MSNBC, or ABC for that matter. These are all biased sources, some more than others. In addition, most reporters really don’t have the depth of understanding about economics needed to analyze this issue. For example, one of my favorite ABC reporters is Dr. Timothy Johnson. He always provides knowledgeable and well researched information – when he’s talking about medicine. When he branches out into commenting on the economic impact of the various health care reform proposals – not so much. To quote a beloved Star Trek character, “he’s a doctor, not an economist.” He should stick to matters of medicine, not public policy. Likewise, most other reporters don’t have the knowledge and training to understand the underlying economics of the subjects they are reporting on either. As a result, we mostly get superficial reporting or a regurgitation of the prevailing wisdom. Don’t let them be your only source of information. Google is your friend.

Ok, on to part one – Why is Health Care So Expensive?

But those of us who understand that there is no free lunch realize that when the government engages in this kind of economic sleight of hand, there is always something on the other side of the equation, hidden from view, which balances out all the “benefits”. Plus, we’ll have to deal with all those pesky unintended consequences which always occur. So let’s take a look at the entirety of the cash for clunkers program and see whether or not it really was a good deal for America.

On the plus side, we’ve got:

1. About 700,000 new cars sold which helped boost the automakers’ bottom line, at least temporarily.

2. The new vehicles purchased through the program had an average fuel efficiency increase of 58% over the average mileage of the vehicles which were traded in. On the surface, it might seem as though this will help reduce our dependence on foreign oil and be good for the environment.

Not so fast. Let’s look at the other side of the equation.

1. The increase in auto sales was only temporary and will do nothing to help the automakers in the long run. Indeed, recent data shows that there will certainly be a huge drop off in sales now that “clunkers” has ended. Auto research firm Edmunds.com describes the coming decline in sales as “a painful hangover” likely to affect dealers in the coming weeks. According to Edmunds Senior Analyst David Tompkins, PhD., “Current purchase intent is down 50 percent from the Cash for Clunkers peak, and down 11 percent from the June average. Day by day, intent is slipping: Sunday activity was down 21% from Saturday, then Tuesday activity was down 16 percent from Monday.” So all the government ended up doing was creating a temporary artificial demand that will soon correct itself. No one really gained anything. In fact, as I explain below, we’re actually worse off now.

2. Of consumers who participated in the program, a much larger than normal percentage are experiencing “buyer’s remorse” about their purchase. As the L.A. Times reported Friday, “CNW Marketing Research Inc., which tracks consumer buying habits, said a survey of 1,000 cash-for-clunkers participants found that 17% had doubts about their purchase of a new car, primarily because of the $275-to-$350 monthly payment they’re now facing.“ So Washington may now be responsible for a large number of Americans having over extended themselves once again. Did our politicians learn nothing from their ill fated attempts to entice everyone to buy a home, even those that couldn’t afford it? Apparently not. And as we saw with the housing market, the creation of an artificial demand for new cars caused the prices of those vehicles to increase. As CNNMoney.com reports, “During the weeks the Clunkers program was in effect, buyers of the Toyota Corolla paid 29% closer to the full sticker price than before the program started. Ford Escape prices were 13% closer to full sticker, and Ford Focus prices were 12% closer.” So those participating in the program may not have gotten as good a deal as they thought, and those that didn’t qualify but purchased a new car anyway definitely did a lot worse. And this price imbalance will continue for the next few months until inventory levels readjust to where they should be based on actual consumer demand.

3. As I suggested above, the $3 billion to pay for this program has to come from somewhere. That somewhere is tax dollars. And as anyone who understands basic economics will tell you, every dollar that is taken away from consumers in taxes, is one dollar less that is available to be spent or invested in other areas of the economy. That’s a dollar less to be spend on clothes, or food, or entertainment, or any of the countless other things that individuals might choose to spend their money on and grow our economy. But, of course, we’re not talking about one dollar, we’re talking about three billion dollars. Now if you’re tempted to think that this was an even trade-off, you’d be wrong. The reason is that there is a cost to collecting those tax dollars and administering the programs. Furthermore, we don’t currently have these tax dollars, we have to borrow them and pay interest on them. Think about the interest on $3 billion. But that’s not the worst of it. The worst part is that the government decided how best to spend this $3 billion. That might not have been the most efficient use of that money. In fact, it’s almost a guarantee that it wasn’t. No government bureaucrat, no matter how smart or well intentioned, can do a better job of deciding how to spend that money than the individuals from whom the money was taken from. Those thousands or tens of thousands of individual purchasing decisions would have, in the long run, produced a better economic outcome and we would all have been better off. Simply put, if those billions of dollars were best spent on buying cars, then that’s how individuals, making their own personal choices, would have spent them.

4. While the new cars on the road might use less fuel and produce less harmful emissions, consider the environmental impact of having to dispose of all the “clunkers” that were traded in. Whatever environmental benefits we may gain from better fuel mileage, we undoubtedly will lose in additional energy usage or environmental damage in disposing of the old vehicles. As any good environmentalist will tell you, in the mantra “reduce, reuse, recycle”, the most “green” of the three is reuse. Also, since many of these vehicles had some useful life left in them, disposing of them prematurely constitutes waste, and waste translates into a reduction of wealth. So, in addition to the economic costs described above, thanks to the waste created by this government program, our society as a whole is less wealthy now.

So was “cash for clunkers” a success? I hope you now know the answer to that question. And I hope you remember it as our politicians concoct their next scheme that purports to give us something for nothing. New refrigerator anyone?

During one of the commercial breaks, I happened to be talking to my friend about the state of the economy and mentioned in passing my libertarian leanings. One of the other couples there immediately took great umbrage at my statement. The wife pronounced that (I’m paraphrasing) “libertarianism can’t work because under such a system there’s no common property and you can’t have a functioning society without a commons such as roads etc.” I pointed out that I never claimed that I was in favor of a society in which there was no commons and that by attacking me on that point she was making a Straw Man argument (claiming I said something I didn’t say and then arguing against it). She apparently didn’t want to engage me further to explore what I did advocate because she simply walked away in a huff. As a result, I never got the chance to explain why she also happened to be wrong about her absolute assertion that a commons is necessary for a society to function.

Then her husband chimed in.

I immediately knew I was in trouble with this guy because the first thing he said was “Libertarians are just Republicans who want to smoke dope, get laid, and (something else I can’t recall now)”. Clearly this was an attempt to demonize libertarians by a) calling them Republicans (as if that somehow means you’re a bad person) and b) suggesting that if you engaged in or approve of those activities, you’re morally bankrupt and your opinions are to be dismissed. Now I honestly don’t believe he came up with this little ditty all by himself; he must have heard it somewhere and decided to parrot it because he thought it made him seem clever. On the contrary, using an Ad Hominem attack rather than using real, logical arguments simply shows you to be intellectually lazy. Plus, if he though that somehow he was insulting me, he was wrong because a) libertarians are not Republicans, they’re libertarians and b) I do believe you should be able to smoke dope and have as much sex as you want without interference from your neighbors (i.e. the government). And I think I’m right.

He then declared that libertarianism can’t work as a political model for a society because no completely libertarian society has ever existed. I hope anyone reading this can immediately see how silly that type of argument is. (He couldn’t.) I responded that no large scale purely libertarian society has yet existed, partly because it’s never really been tried. He then said it hasn’t been tried because libertarian societies don’t work. It’s pretty hard to debate someone who engages in circular reasoning. It’s even more frustrating when you point out what they’re doing and they refuse to see it.

Furthermore, I tried to explain, I wasn’t advocating for a “purely” libertarian society, just one that was more libertarian than the one we have now. He refused to acknowledge my clarification of my views and insisted that if I was a libertarian I must believe this, that, and the other thing – all of which he went on to claim were wrong, couldn’t work, etc. I tried to explain that, like his wife, he was making a straw man argument and to have an intellectually honest discussion, you don’t get to do that. Again, the point was lost on him. So, I figured I’d try once more to explain why his previous claim that libertarianism can’t work as a political model for a society because no completely libertarian society has ever existed, isn’t proof of anything. I said that, using his reasoning, prior to the successful founding of the United States, a critic could have claimed that “since the type of democracy the founding fathers are advocating hasn’t existed before, it can’t work”. And we now know how wrong such a critic would have been.

He then went on to try to prove me wrong by saying that ancient Greece had a democracy and therefore my example didn’t hold up. I tried to explain that, once again, he was making a straw man argument. In my example, I didn’t say the critic would have claimed that “no democracy had ever existed before”. Rather, I said the critic could have claimed that “the type of democracy being advocated by our founding fathers” hadn’t existed before. He had again changed my argument and then attacked his distorted version of my position.

Furthermore, I said, “my critique of your faulty logic still stands even if you’re claiming that Ancient Greece was the first democracy”. In that case, we use Ancient Greece as the first instance of democracy. And, prior to the institution of a democratic government there, any claim that democracy couldn’t work because it had never existed is revealed to be an equally silly argument. Apparently this was too much for him to understand because he kept claiming I said “no democracy had ever existed before”, and because he could prove that wrong, he was entitled to dismiss my entire point.

So let’s summarize – Basically his arguments boiled down to:

The Straw Man

Libertarianism as I define it means that you believe X, Y, Z.
X, Y, Z is wrong (can’t work, has the following flaws, etc). Therefore, you’re wrong.

Circular Reasoning
Libertarianism doesn’t work. I can prove that because no completely libertarian society has every existed. No completely libertarian society has ever existed because no completely libertarian society has ever been tried. No completely libertarian society has ever been tried because libertarianism doesn’t work. Therefore libertarianism doesn’t work.

I finally gave up trying to talk sense to this guy and went back into the den to watch Slumdog Millionaire sweep the Oscars.

By the way, there are some limited historical examples of workable libertarian societies. Go here to read a short summary about them. And here for a very detailed article.

Also, just for completeness, I want to point out that his (and his wife’s) initial statement that “libertarian societies can’t work” is meaningless unless you define “can’t work”. Do they mean a) will collapse after X period of time? How long is X? b) can’t be formed in the first place? c) would not be a just society? d) would not be a pleasant society to live in? etc. You must define your terms. Generalities like “can’t work” have no place in intelligent, logical discussions.

And for those of you who might think it a bit boorish to argue political philosophy at my friend’s Oscar party, I agree. But I didn’t start the debate with this guy and his wife. I was talking to my friend and they chimed in, rather rudely I might add.  I certainly couldn’t let their ridiculous and fallacious attacks against my beliefs to go unchallenged.