Free Markets, Free People

Daily Archives: January 27, 2011

Book Review: The Politically Incorrect Guide to Socialism

I regularly receive review copies of new books from Regnery Publishing. Occasionally, one stands out above the rest, such as Kevin D. Williamson’s The Politically Incorrect Guide to Socialism.

I am not a huge fan of many of the Politically Incorrect Guides.  While they are all relatively enjoyable reading, all to often they suffer from a shotgun approach to their subject, in that they try to bring too many threads together in a relatively brief book, rather than telling a single, compelling story.  Williamson’s Guide does not suffer from this problem, but rather sticks to a simple, powerful theme. From the democratic socialism of Sweden and India, to the authoritarian socialism of Hugo Chavez’s Venezuela, to the hard communism of the Soviet Union, Williamson exposes and explains the central problem of socialism: The futility of central planning.

The trouble with socialism is not that it redistributes income to create perverse incentives–although it does do that–but rather that it attempts to do something that is literally impossible, which is to centrally plan the economy.  Indeed, even planning relatively small parts of the economy are impossible. To illustrate this problem, Williamson uses the relatively simple problem of trying to plan for milk production:

There are 115 million households in the United States. If we imagine a weekly milk consumption budget for each of them, that’s 5.9 billion household weeks to plan for. Adding in a fairly restrictive list of variables–call it zero to twenty quarts a week, four levels of fat content, organic/non-organic, soy/dairy, and three flavor options, you end up with around 6 trillion options to choose from…

If they took just one second to consider each of these options, it would take them 190,128 years just to tun through the possibilities of one year’s milk consumption in the United States.

Ah, but if it were only that simple. Milk consumption is, alas, variable over time.  Some families may use more milk making ice cream in the summer months. Some families may decide to reduce consumption for health reasons.  The actual demand for milk–or any other good, for that matter–is essentially unknowable in any rational sense.

In country after country, covering a variety of issues, Williamson points out how, time after time, the record of socialism is one of utter failure. Whether it’s the provision of food, housing, education or medical care, Williamson demonstrates how central planning invariably produces worse outcomes than free markets.

Except, of course, for those who are planners or their associates.  Things always work well for them.

In addition to his central thesis, Williamson demonstrates, along the way, how the inability to use price signals further hampers the ability of socialism to rationally match supply with demand, because economic calculation is impossible in the absence of real price data. And, perhaps even more importantly, he inquires into why the central planning impusle is ultimately antithetical to liberty and democratic governance.

This is definitely a book for the layman. Williamson explains in clear, simple language, the fundamental economic and political principles that make socialism so damaging. He doesn’t delve deeply into abstruse theoretical arguments, but rather looks at the controversial policies of the last few years to detail their shortcomings with with clarity and simplicity that should strike a chord with even those who have a minimal understanding of economics or politics.

I highly recommend this book.

ObamaCare update–waivers and falsehoods

Yesterday, after the SOTU had been delivered and all attention was on discussing it, the Office of Consumer Information and Insurance Oversight (OCIIO), part of the US Health and Human Services Department, quietly announced that it had granted 511 new waivers to Obamacare (for a total of 733 as of this post) since its last report in November.  Hot Air had been monitoring the site and found it rather interesting that a site that had been efficiently updated through November suddenly wasn’t updated until after SOTU.  A bit like the CBO’s announced revision of this year’s deficit.

Anyway, the list contains businesses, local unions and other entities.  Additionally, four states have applied for waivers (MA, NJ, OH and TN).

The reason for all these waivers (which, btw, only delay their integration into ObamaCare, it doesn’t exempt them)?

This ever-expanding list of waivers is the direct result of ObamaCare raising the annual benefit caps on certain health plans. Obviously, a plan with higher annual limits is potentially more costly than one without them. The money to cover the difference in premiums has to come from somewhere. Without the waivers, it will come from the employer who are forced by law to upgrade to the more expensive plan.

2.2 million effected with the waivers granted to this point.  Part of that “less costly” promise Obama made when he was peddling this monstrosity.

Speaking of falsehoods, Jen Rubin at the Washington Post  reports on an interesting exchange between Congressional reps and Medicare’s chief actuary (Robert Foster).  In this particular exchange they discuss the “double-counting” that was used to justify ObamaCare (and which the Democrats and their pet economists like to claim is nonsense:

REP. JOHN CAMPBELL(R- Calif.): "Is it legitimate to say… that you can add a dozen years to the solvency of Medicare or that you can reduce the deficit, but it is not correct to say both simultaneously?"

FOSTER: "Both will happen as a result of the same one set of savings, under Medicare. But it takes two sets of money to make it happen. It happens directly for the budget deficit, from the Medicare savings, and then when we need the money to extend the Hospital Insurance Trust Fund, we have a promissory note – it’s an IOU, not a worthless IOU, but it is an IOU – and Treasury has to pay that money back. But they have to get it from somewhere. That’s the missing link."

These are the sorts of budgetary tricks that Congress is famous for using (and it isn’t just the Democrats, although it was certainly the Democrats in this case)and one of the reasons we see government in the horrific financial shape it is in.

So, where is the money – promised in the IOUs for the money designated for Medicare but spent elsewhere – going to come from? Of course the Democrat’s answer is from higher taxes. But don’t worry – the result will be "lower health care costs" or so says the plan. Amazing.

Then Foster was asked about this:

Two of the central promises of President Barack Obama’s health care overhaul law are unlikely to be fulfilled, Medicare’s independent economic expert told Congress on Wednesday.

The landmark legislation probably won’t hold costs down, and it won’t let everybody keep their current health insurance if they like it, Chief Actuary Richard Foster told the House Budget Committee. His office is responsible for independent long-range cost estimates. . . .

Foster was asked by Rep. Tom McClintock, R-Calif., for a simple true or false response on two of the main assertions made by supporters of the law: that it will bring down unsustainable medical costs and will let people keep their current health insurance if they like it.

On the costs issue, "I would say false, more so than true," Foster responded.

Finally, this exchange:

McCLINTOCK: "The other promise… was the promise that if you like your plan, you can keep it. True or false?"

FOSTER: "Not true in all cases."

Really?  Other than true believers, who else thought “oh heck yeah, we can add more people to the rolls, require insurance companies to take everyone regardless of their health and remove all payment caps and have a cheaper product too boot?  The same people who swallowed “if you like your plan you can keep it”, I guess.

For those folks: welcome to reality.  If you think the new revised budget deficit of 1.5 trillion this year is alarming, wait till ObamaCare kicks in fully.  Oh, and repeat after me “this is not the government taking over health care”.