Sunday, November 14, 2010

The Unintended Consequences of Government Subsidy

One of the things that every high school civics class teaches children is how the tax code works. To simplify it,

1. If you want more of something, the tax code subsidizes it.
2. If you want less of something, the tax code taxes it.

This theory plays out in many ways in our twisted system. Businesses get tax breaks for supplying insurance to employees. Why? Back in the 1940s and 1950s, insurance was one way businesses could give employees incentive to work for them without increasing wages. Over time, the idea of business subsidizing health care looked pretty good to government because it meant fewer people who would need services provided from the government (such as county hospitals.

Another incentive in the tax code is the home mortgage deduction. Owning a home causes people to display a variety of desirable behaviors (lowering crime rates, less urban blight, etc.), and so the tax code has this deduction in it to encourage people to buy homes (the current debate about the elimination of this deduction to help balance the budget shows just how ingrained it is in the American psyche).

The tax code also punishes behavior. High taxes on liquor and cigarettes are designed to stifle interest in these products.

These government subsidies "for the greater good" seem like a good thing at the time they are passed, but, as with everything else, there are unintended consequences. The home mortgage deduction has (according to all the talking heads) enticed people to buy bigger, more expensive homes that they cannot afford without the deduction. Some argue that deductions for children and child care just give people more reason to overpopulate the planet. Still others think allowing churches to be tax exempt is an egregious violation of the First Amendment.

Here is the latest unintended consequence of government subsidy: Obamacare means fewer people want to work.
Speaking at a little-noted event at the University of Southern California’s Leonard D. Schaeffer Center for Health Policy and Economics, Mr. Elmendorf noted that, outside the healthcare sector of our economy, the greatest impact of the Obamacare agenda will be in the labor market. It was October 22nd, just days away from the big midterm election, and Elmendorf’s presence at this conference, and his remarks at the conference, did not receive nearly the amount of press attention that they deserved.

Mr. Elmendorf stated that, in some cases, Americans will simply choose not to work, because their needs for healthcare will be provided by the enhanced Medicaid funding that is provided for in the Obamacare law. As Journalist Matt Cover noted at (he was one of few journalists that actually reported on this event), this assessment of Obamacare by Mr. Elmendorf coincides with Speaker of the House Nancy Pelosi’s remarks last May. Back then, Speaker Pelosi insisted that Obamacare would allow “artists” to “quit their day job” and pursue their art, free from the constraints of having to provide for one’s self, because the government would now take care of artists’ healthcare needs.

Liberals think working is a bad thing. Having to provide for yourself--especially in a job that is less than entertaining--is evil. In the liberal world view, it's unfair that some people have jobs they enjoy and thrive at while others are stuck doing menial things. This is especially true if the "fun" job pays well and the "menial" job doesn't.

Many liberals (like Amanda Marcotte) were perfectly honest about Obamacare: the government should provide health care (not insurance) for everyone so that no one "has" to get a job or stay in a job. Why? Because it isn't fun to work when you don't want to or don't like what you do.

I don't know what these "fun" jobs are that liberals are afraid rich people have. Even those evil CEOs have meetings and responsibilities they don't like but accept as part of the job. Every small business owner I know doesn't like something about running their own business, but they recognize that nothing is "fun" all the time.

Life may be a picnic, but that doesn't mean someone doesn't have to do the work for it ahead of time. Liberals thinks money magically appears and it isn't fair that someone else got more. Programs like Obamacare are designed to allow more people to not take care of themselves. That's just a bad idea.