2013-12-02

Silver Linings

While you won't find me singing any praises over socialized medicine (including the ACA), minimum wage increases, and the like, sometimes I feel that the American political system has solved these controversies in a way that satisfies rhetoric without sacrificing economic sanity.

Take the minimum wage (please). While the idea of increasing it is always tossed around by populist politicians - and always, always refuted by economists and libertarians - the minimum wage has continued to decrease in real terms for years. The last time I myself drew a minimum wage paycheck was when I was in high school, and that's not merely because I've been working high-skill jobs ever since. No, the truth of the matter is that it has been at least twenty years since the federal minimum wage was high enough (again, in real terms) to impact labor economy equilibria. I suspect this is why we occasionally see minimum wage studies that "refute" the neoclassical predictions.

So it may be with ObamaCare. The law says everyone has to be covered. Federal subsidies kick in for anyone who can't afford coverage. But insurance companies can't just magically become a health care cornucopia, they actually have to make profits. If they don't, there isn't any money to pay for claims. They have to make money to pay claims. So the Feds write a law that mandates coverage, and insurance companies provide "coverage." Never mind that this new "coverage" is bare-bones coverage with high deductibles, lots of limitations, and very high premiums. It's "coverage," dammit.

So the result of that sort of thing is that people end up paying more out-of-pocket. "Paying your deductible" is actually 100% the same thing as paying cash for health care services. You pay cash out of your pocket, and in exchange, you get health care. The only difference between that and a true cash market is that after you meet your insurance provider's "deductible," they start paying for your health care.

As a free-market libertarian, I want to see a more robust cash market for health care. I want to see the price mechanisms restored in the health care market. That will make prices fall and spur competition for those health care dollars, without third-party rackets interfering with and distorting the market.

Similarly, I want to see as much competition in the low-skill labor market as possible. That reduces prices, increases employment, and improves working conditions for everyone.

No, we don't have a real free labor market, because we do have a minimum wage; but it's only a nominal minimum. Maybe the ACA has "provided health coverage to millions of uninsured people;" but if it's only nominal coverage, then the free market will take over and split the difference.

So there is reason for optimism here.