Will Wilkinson: G.O.P. Should Embrace the Welfare State
2017-07-16 · Guest: Will Wilkinson (VP for Policy at the Niskanen Center) · 50:32
GOP Electoral Strategy and the Welfare State
Bob Zadek interviews Will Wilkinson about his provocative argument that the Republican Party should embrace the welfare state to secure its electoral future and promote a more dynamic, free-market economy. They discuss the distinction between fiscal spending and regulatory burden, the role of social insurance in mitigating the “creative destruction” of capitalism, and whether high-tax nations can maintain high levels of personal and economic liberty.
Topics: GOP Policy, Welfare State, Libertarianism, Healthcare Reform, Economic Growth, Property Rights, Social Insurance, US-China Relations
Speakers: Bob Zadek, Will Wilkinson, Caller (Eben), Caller (Jacob)
The GOP’s Policy Dilemma [00:00]
Bob Zadek: Hello everyone, welcome to the Bob Zadek Show, the only live libertarian talk radio show on the air all weekend. Thanks so much for listening. I am, as always, your host, Bob Zadek. 424-BOB-SHOW to join my conversation at any time.
Don’t you just hate it when you have worked so hard to develop a system of core beliefs that you know are right, that you know are inviolate, done deal, you figured this principle out, and then you go and read a well-written, interesting, sometimes brilliant article in the media and everything you thought you knew, or at least some of it, is called into question? Well, that happened to me circa May 27th, 2017, when I read an article in the New York Times—reading the New York Times is always a hazardous activity. In any event, in reading an article in the New York Times, I read: “For Trump and GOP, the Welfare State Shouldn’t Be the Enemy.”
It was an article written by this morning’s guest, Will Wilkinson, who is suggesting to, scolding the GOP, that the way to move forward—the indeed libertarian way to move forward—is to more warmly embrace welfare specifically and forms of big government in general. That sounds like an anathema to everything we believe in. Maybe it is, but will it be an hour from now? You will find out.
Introducing Will Wilkinson [01:16]
Bob Zadek: With that introduction, I’m happy to welcome to the show this morning Will Wilkinson. Will is Vice President for Policy at the Niskanen Center. He oversees the center’s research and publications. He’s an active columnist for Vox’s “Big Ideas” section. He has been a research fellow at Cato and was a founding editor of a must-read blog, Cato Unbound. Will, welcome to the show this morning.
Will Wilkinson: Good morning, Bob. Thanks for having me on.
Bob Zadek: Thanks again for the article. It got me thinking quite a bit, and the second I put down the article, I told my producer you had to be a guest on the show so we can see if I am indeed appropriate for a conversion in at least some of my worldviews. Now Will, your article was not your first foray into this exploration of whether or not big government—and we’ll define that; big government is not a helpful expression, but Will and I will drill down and define big government—whether a big government approach in one form or another, and specifically welfare, a more embracing welfare policy, is indeed a libertarian approach and is indeed the secret for the GOP to establish more firmly its electoral majority. So Will, tell us, if you will, by way of introduction, what was the broad thesis of your article and the principles that drove you to write it?
Trump, the GOP, and the Welfare State [02:19]
Will Wilkinson: Well, the New York Times piece that you’re talking about, the thing that got me writing this particular piece was watching the disaster unfolding on Capitol Hill. The Republicans have the White House, they have both houses of Congress, they’ve got a majority in the Supreme Court, and they cannot pass any significant legislation. And I asked myself, why is that exactly? I mean, it seems like they ought to be able to just, you know, run the table, just get anything that they want through.
And as I was thinking about it, it just occurred to me that they’re caught in a bind. Donald Trump is not a typical Republican politician by any means. He ran directly against the sort of Reagan formula of, you know, smaller government, free markets, all of this stuff. He just ran directly against it, promised his voters that he wasn’t going to cut Medicare, he wasn’t going to cut Social Security, that he wasn’t going to let people die in the streets. He was even praising single-payer healthcare on the campaign trail, and Republican voters ate it up. They loved it. They love their Medicare.
Republican voters are older, white, non-urban, and many, many, many of them depend on Medicare and Medicaid to get by. Most of them, if they’re over 62 or three or four or five, are on Social Security. Republican voters’ standards of living really depend on these transfer programs, and Trump’s message to them about that was really, really popular.
But then he gets in office, and he doesn’t have any capacity to actually implement this agenda. He doesn’t have think tanks behind him, he doesn’t have policy journals behind him, he has no pool of talent to draw from. He’s just stuck with the GOP status quo, who are still committed to a certain kind of supply-side economics and a certain dogma about the importance of cutting government spending and cutting tax rates in order to rev the economy up. And so he’s just stuck with their agenda, but Republican voters don’t like it. They voted against it.
And so you’ve got moderates in the House and in the Senate fighting with the more ideological free-market parts of the party, and it’s just—they’ve ground to a halt. And that’s why you see right now in the Senate, like Mitch McConnell is pulling out all the stops to jam through this healthcare reform bill. It’s like the most unpopular bill in the history of bills, right? It’s much less popular than the bill that it’s supposed to replace, even among Republicans. And the reason that they’re trying to ram this incredibly unpopular piece of legislation through is that it creates space to have a bigger tax cut. And they think that is completely imperative because they think that the economy won’t grow, that we won’t get innovation and prosperity unless we slash the size of government and cut tax rates.
Why a Libertarian Cares About the GOP [03:56]
Bob Zadek: The interesting part of your piece, and indeed our prior conversations and your writing, is that you are not by profession, by what draws your intellectual attention, you are not a GOP, a Republican operative. You do not see yourself as put on this earth in order to achieve Republican success in the ballot box. You are at your core—you have deep libertarian roots, you believe in libertarian policy of basically, as Matt Kibbe said in his book, “Don’t hurt me and don’t take my stuff.” You are in general a libertarian. And here you are advocating or suggesting how the GOP can win more, have more electoral success. So my question is, why do you care whether the GOP is successful, and what does that have to do with your and my—if I can speak for you just for a moment—our core beliefs of how we believe our country ought to be organized?
Will Wilkinson: So, you know, we all live under the laws that Congress passes and that the President signs and that the Supreme Court vets. And it’s important to me that both of the major political parties are operating according to reasonable ideas. So I want Republicans to be successful insofar as they’re promoting policies and ideas that I care about.
One of the things that frustrates me in particular about the ideas that I’m discussing in this article is that these are things that I care a lot about. The Republicans are constantly going on about liberty, the importance of free markets, but I think they fundamentally misunderstand what it means to have free markets and the way free markets make our standard of living higher and help people flourish. And so I would like to help them get out of this confusion because I would like it if, when Republicans are in power, that they are pushing policy that actually will move the dial on freedom. And I feel like their current policy package is self-destructive, it’s self-undermining, that their attitude towards the welfare state is actually undermining political demand for free-market reform. And that starts to push us, I think, a little towards the mistake of confusing how much money the government spends with how regulated the economy is.
Defining “Big Government”: Fiscal vs. Regulatory [06:19]
Bob Zadek: That’s an important point, and I was hoping you would get to that, and of course you did. My introduction discussed the vague, unhelpful term “big government.” And you actually, in your piece and in other writings, as a libertarian, you advocate for big government. And as you explain that, please tell us what you mean by big government as you use it in your advocacy. So what should be bigger than it is now, and how does that fit into welfare policy?
Will Wilkinson: Well, I want to be clear, I don’t necessarily advocate for big government. It’s—but I don’t think it’s something to be afraid of, that there’s no evidence that it really hurts our level of freedom, either economically or our freedom overall.
So what I mean by big government—so a point that I make in this piece, but I’ve made in many pieces, is that it’s really important to understand the distinction between how much money the government spends—like how much of total economic output the government consumes—and that’s going to have some relationship to what tax rates are. So if the government spends more, taxes are going to tend to be higher. That’s the sort of fiscal side of government. It’s the taxing and the spending.
There’s this whole other side of government: it’s the regulatory side of government. You know, how much red tape do you have to go through to get your business started? Do you have to get a license to go into a particular occupation? I’m here in Iowa where I live, you know, there is one of these many cases about whether African-American women who braid hair have to go get a cosmetology degree from a cosmetology college. Right? That’s not a fiscal issue. That doesn’t have anything to do with taxing and spending. That has to do with the meddlesomeness of the state in putting requirements on people who want to enter into voluntary economic relationships with other people.
That aspect of government activity, the regulatory side, has a profound impact on how efficient and productive and innovative our economy is.
The Complementarity of Free Markets and Safety Nets [07:30]
Bob Zadek: That’s because it messes with the economic system, and you’re exactly right. Where government’s intrusiveness is messing with the markets and the core economic engine, then of course you are right, and that’s an important distinction for our friends and listeners to understand. So what part of the big government that you found interesting in your piece is the relationship of GOP policy and indeed libertarian enlightened or neoclassical, neo-libertarianism, is the relationship to welfare? And that I found to be the most interesting and provocative concept in your piece. So help us understand where your view on welfare policy and welfare generosity, if you will, is perhaps a lot different from our listeners and how they might be surprised, and explain your position.
Will Wilkinson: Well, I think free markets and a sort of robust safety net are not in tension. On the contrary, I think they’re complementary, that they’re part of a mutually reinforcing system.
So if you want free markets, you want unfettered capitalism, which I do. I want entrepreneurs to be free to start businesses without the government getting in the way. I want people to be able to enter into economic relationships without having bureaucrats standing between them. I don’t think you should have to ask permission in order to sell something to somebody or to do a job for somebody. So I want free markets, I want a high level of innovation, and I want a high rate of growth because economic growth produces the resources that make people better off. It leads to happier people, it leads to healthier people, it leads to people who live longer lives.
So you want this process to be unhindered. You want this dynamic process to really be able to let loose. But if it does let loose, if you really do have a dynamic, innovative, high-growth economy, it creates a lot of creative destruction, as Schumpeter called it. The term these days is “disruptive innovation.” Right? So if you have a lot of disruptive innovation, that means a lot of people get disrupted. People lose jobs, whole industries might go under, and people will have to find jobs elsewhere. There’s a lot of dislocation in a dynamic economy. And the more dynamic it is, the more dislocating it is, the more disruptive it is, the more destruction there is—creative destruction.
We like it because it’s building something better, but there really are people that are left behind. And people get worried about that. And if a whole swath of the electorate is constantly feeling anxious about whether they’re going to be left behind, that whether the plant in town shuts down, what will I do? How will I feed my kids? That doesn’t open them up to the idea of deregulation. What it does is opens them up to the idea of clamping down in a way that gives them a sense of security. They tend to reach out for populist politicians like Donald Trump, who makes a lot of empty promises that sound good to people who very reasonably don’t know a lot about how economies work. They hear him say he’s going to bring the coal mines back, and they like that. They hear him bullying companies to try to persuade them not to move their plant to Mexico, and they like that. They hear him saying that he’s going to close the borders so that, you know, brown people aren’t going to take your jobs, and people like that.
All of those things are terrible for the economy. It’s actually going to leave them worse off, but they start demanding things that give them a sense of assurance and security because they feel so anxious about living in a dynamic economy. If you give people a little bit of insurance—and this is the idea of social insurance, this is what the modern welfare state is based on, this idea that you should insure people against the downside risk of a dynamic economy—if you give people that assurance that there’s a cushion beneath them, then they’re just less anxious. And if they’re less anxious, they’re less likely to endorse the kind of nationalist, populist policy that actually will hurt them and the entire country.
So I think in general, there’s this complementarity: that if you give people a safety net, that sense of safety creates political buy-in to a dynamic system. And that dynamic system, the upside of that is much greater than the downside to paying a little bit more in taxes. It more than compensates for that.
The Principle of Wealth Transfer [09:48]
Bob Zadek: What about the principle? What about the principle that you and I, I suspect—I’ll just speak for myself—the principle that it is wrong to the greatest degree that a policy that simply says something that I have earned, somebody else whom I never met deserves my property more than I do by dint of government edict? That this stranger in the Rust Belt is more deserving of my property than I am, even though I earned it? Which is bedrock core libertarian principles, wealth transfers. What do you say, by being true to your own principles, that that policy of wealth transfer is defendable as a matter of principle?
Will Wilkinson: Well, that’s a tricky question. The way I answer that is that first of all, you need some sort of justification for the institution of property. What is the argument for property rights in the first place? And for me, the incredibly compelling argument for robust property rights is that it creates clarity, it allows people to plan, it gives people incentives to work hard and to create the most value that they can out of the assets that they have because they know that they’ll be able to keep them. And the empirical evidence that places that have strong property rights, that those places do better economically is just airtight. It’s a great argument.
But the argument for that is an argument that this institution, this set of rules, tends to work to everybody’s benefit. That even people who don’t have a lot of property will end up better off if we have strong property rights, that a system in which there are these very strong property rights and people have assurances in the inviolability of their property is a society in which everybody is going to tend to be a bit richer. And that’s going to benefit even people at the bottom of the economy who don’t have so much.
I think the same logic applies when you’re thinking about the welfare state. If you want to think about what institutions are going to leave everybody better off over the long run, you have to understand that the dynamic nature of capitalist economies stirs things up and leaves some people vulnerable. And economic systems are embedded within political systems, like it or not, and that you have to maintain a certain level of political buy-in to a relatively liberal free-market order. And the best way to do that is to give people an assurance that they’re not going to fall below a certain minimum in terms of their income.
And you can justify that to the people who are going to be paying more into the system because again, the system over time leaves them better off than they would be in an alternative system. A system that was just absolute dogmatic about, so taxation is theft, and if it just treats taxation as theft and does so—it becomes very hard to finance anything that the government does in that case. But one of the things that, when people talk about that, they want to rule out redistribution. So a system in which you do no redistribution, is that really going to generate the kind of wealth that’s going to leave everybody better off?
And I would submit that the people with the most property aren’t going to end up with as much property in a system in which taxation is treated like theft. I think they’re going to do better in a system in which they pay a little bit in taxes, it finances a safety net that ensures that everybody benefits from economic activity, and that system is going to be more stable and it’s going to grow over time in a consistent and less volatile way. And the people at the top are going to end up doing better than they would have if their tax rates had been maybe a little bit lower. And that’s worth it. So that’s what I’d say.
International Evidence on Freedom and Welfare [14:48]
Bob Zadek: What about the danger? What about the political reality? Because you’re quite obviously a political realist. What about the political danger, as we have seen with Obamacare, that once you open the floodgates and start to provide for what we will discuss later on as a negative income tax or a minimum guaranteed income, once you do that, then what starts is a process by which the guarantee increases and increases and increases? And like the fear of a value-added tax, a VAT tax, which they have in Europe where the tax keeps on increasing and it’s a stealth tax, what about the fear that you will compromise a principle, start a process of wealth transfer that will end up being destructive because there is no ideal level? And it’s very hard, as we have seen with Obamacare, to undo or to modulate the amount of wealth transfer once you start the process.
Will Wilkinson: That’s a good question. And that’s the kind of question that I think is best answered just by looking at the data, looking at the evidence of what happens in other countries. And this relates back to the property rights point as well.
So if you’re worried about the level of taxation as a sort of limitation on your right to keep your property, there are indices of the integrity of property rights in different countries. And that’s part of the Fraser Institute or Heritage’s economic freedom index. And it turns out that countries with high tax rates and big welfare states do really, really well on the property rights dimensions. Like that might seem counterintuitive if you feel like taxation is necessarily a violation of property rights, but it means that these countries actually understand the importance of property rights in an economic system and they’re extremely good about protecting them generally. They don’t—the government doesn’t just take your property, there’s not a lot of eminent domain, there are good judicial procedures for ensuring that people can defend their property claims and so on and so forth. So it’s not the case that places that tax people a lot just treat people’s property with disrespect and take it away willy-nilly. So that’s an important thing to keep in mind.
Similarly, when you look at just the comparative international evidence, it’s just not the case that places that end up spending a lot on the welfare state go down the road to serfdom. These places are some of the freest places in the world. So for instance, our neighbor to the north, Canada, famously has socialized healthcare. It’s got a single-payer healthcare system. The state finances most of the healthcare spending. That’s very, very expensive. And so they take a pretty big hit in the economic freedom index for that expenditure. I mean, the taxes have to be higher and the government has to spend a higher percentage of GDP in order to sustain that kind of system.
Nevertheless, Canada comes out higher than the United States in terms of economic freedom. So this one policy—and I’m divided about the best way forward in terms of our healthcare system, I think that’s complicated—but what you do see is that places that have socialized the healthcare system aren’t therefore socialist overall. Many of the places with single-payer healthcare systems or other kinds of government finance for healthcare do extremely well on other dimensions of economic freedom. And they do extremely well on overall measures of personal freedom.
If you take—Cato has a personal freedom index that combines their economic freedom index with something they call the personal freedom index, which includes stuff like rule of law, freedom of assembly, safety and security, stuff like that. And a lot of these places that have very, very big governments that spend a lot on the safety net, that might even have socialized healthcare, are right at the top of Cato’s personal freedom index.
And so if you’re really, really worried about this kind of slippery slope argument, that oh well, if we start—if we just accept the fact that we need a welfare state and we start spending on it, doesn’t that just mean that we’re just going to spend more and more and more and the government’s going to get more and more and more intrusive? Well, that’s just not what you see. You see that many of the places with the biggest welfare states are also some of the freest places in the world. And that’s why I said earlier on that I just don’t think big government is something to be afraid of. It’s something that is shown in the data, in the evidence, to be perfectly consistent with a very high level of both economic and personal freedom.
Healthcare vs. the Food Market [17:52]
Bob Zadek: This is Bob Zadek spending a wonderful morning speaking with Will Wilkinson. 424-BOB-SHOW to join my conversation with Will. We are looking into whether or not one can modify a pure libertarian position, which is no wealth transfers, property rights are supremely important, and not much support for welfare, whether that position ought to be moderated or whether there’s room for wealth transfers in support of those people who are dislocated by the dynamic economic environment we live in.
Now Will, two points. I tend to be somewhat pure—I try to be—in my approach to affairs. And you said you weren’t sure about how the perfect healthcare system ought to look like. You were somewhat sympathetic or interested in the Canadian single-payer system. To give just another point of view, I am so clear about how the healthcare system ought to look like, and it is the same way our food system looks like. Food is as much of a necessity as is healthcare. It is essential for life. And yet food is, for the most part, the marketplace for food is not regulated. We have tremendous choice. We shop, we buy what we like, we change our mind, we shop for price or for quality. And everybody seems to get enough of it. And we have at the very bottom, perhaps food stamps or SNAP, whatever it’s called right now, some program to give people at the lowest rung some amount of money to buy food.
There’s nothing, I think, different between looking at food, a necessity for life, and healthcare, a necessity for life, and to look at both marketplaces and say: food seems to work, healthcare doesn’t work. So why is it so difficult to imagine a healthcare system that mirrors our food delivery system, which works perfectly?
Will Wilkinson: Oh, I agree, Bob. The reason it’s a tricky and complicated issue is that actual public policy tends to be extremely path-dependent. And so the path from here to there is always a difficult question. And that’s what I find complicated. And I am a political realist and believe in making incremental change that people buy into. So it’s hard to see the incremental path for me toward the kind of system that ideally I’d like.
But I believe in prices, right? Like I believe in free exchange. So I absolutely agree. The healthcare system is a nightmare in large part because it is so incredibly heavily regulated. Like I shouldn’t need to have to be a doctor—you have to go to I don’t know how many years of school, and basically you have to learn everything about the human body. And it’s kind of like requiring that the mechanic on your car, in order to change your carburetor, needs to have a degree in mechanical engineering from MIT or something. Right? Like you don’t need that. Like if a lot of it is you just need somebody to prescribe you antibiotics, you need somebody to give you some stitches. Like somebody who’s really, really good at sewing is probably going to be pretty good at giving you stitches. And it shouldn’t be illegal for them to have a little shop where they give people stitches. But it is illegal. And those things drive up costs incredibly.
The way that medical licensing restricts who is able to legally provide healthcare services has an enormous effect on prices. And there are just so many things in that market that are just—people can’t do freely. You can’t get drugs that you might need. So I agree with you that if we had a market system that was competitive, if we had real insurance—if it was legal to sell somebody an insurance policy the cost of which reflected their actuarial risk—that would be great because the signals that the costs—but nobody has food insurance. Nobody has food insurance.
Bob Zadek: I say if you start with—and this is not a healthcare show, but just to comment because I picked up on what you said—and nobody has said, even on the far left, that food is a right. And what’s interesting is, of course people ought to have food, nobody disputes that, but to elevate it to something abstract like eating is a right, nobody has found it necessary to say that in defense of a position because it is plentiful and cheap. Well, there’s nothing special about healthcare.
Will Wilkinson: I think you’ll find that there are people that say that food is a right.
Bob Zadek: Well, only people in Marin County where food is a religion. But that’s a different issue.
Will Wilkinson: I was just going to say that the rights language—and this is an area where I feel like libertarian-leaning people and sort of left-wing people just kind of speak different languages and have a hard time communicating because the left wants to talk in the language of positive rights and people who come from a libertarian background like to enforce a distinction between negative rights and positive rights. So all anybody has a right to is a certain kind of non-interference, they might say.
But I think everybody actually agrees in the most important way that everybody ought to have enough food. Everybody agrees that everybody ought to have access to healthcare. Whether or not you want to couch that in the language of rights is ultimately I think a choice about how you want to use words, but we shouldn’t get distracted by it. Because the argument like the one you’re making, that we all have food because we have a relatively competitive, relatively unregulated market in food, is a good argument. Like if you do think people have a right to food, what makes good on the entitlement that is implicit in that right? It doesn’t necessarily mean that the government gives you money for food or gives you food. What you’re entitled to is whatever social system, whatever system of institutions delivers the goods.
So if you think that people have a right to healthcare, what you should think they have an entitlement to is whatever system of institutions that’s going to most reliably deliver the goods and deliver the best goods. And that isn’t necessarily government provision. So that’s just a point that I like to make where even if somebody—like you don’t really have to argue against the idea that somebody has a right to something, it’s just important to say that if you think people have a right to something, you need to specify what kind of system is actually going to give them what you say they have a right to.
Caller: Naturopathic Medicine and Regulation [22:39]
Bob Zadek: I have two callers on hold. I want to go to our callers, but one comment. You said a word, you snuck a word in that I have to just respond to. You said “everybody should have healthcare” or “should have food.” The word “should” is kind of tricky. And lest you slip it by, “should” either means it would be nice if they did have it, or “should” means they must have it by government edict. I agree with the former, it would be nice if they had healthcare, but not “should” they are entitled to it. Just a minor—it’s like with my friends, I tell my friends don’t ever start a sentence with me with the word or using the verb “should.” “Bob, you should do this.” That’s a real turn-off. As opposed to, “I have an idea, Bob, please consider this.”
Now with that commentary on your sneaking in the word “ought to have,” I’ll take some callers. Eben from Fairfax, good morning, welcome to the show. What’s on your mind this morning?
Caller (Eben): Well, since the main focus of the conversation is on healthcare, I think that it’s the fine time to introduce the options of healthcare, which is to say that there are MDs and there are NDs, and of course other styles. But I would think that a naturopathic doctor should have equal coverage or equal attention as opposed to say a medical doctor, which in the extreme some people would say would be tantamount to the leaning toward the drug-fed pharmaceutical cartel. And so I think that other options of Medicare should come up during this part of this conversation and in the healthcare conversation in general. As long as we’re opening up ideas and options, I think that the naturopathic doctor thing being on equal terms with the medical doctor thing is very, very important.
Bob Zadek: That’s such a great topic. I’m going to elbow my way in and respond first and then hear from Will. So first of all, I couldn’t agree more with what you have said, Eben. However, I would say it’s only a highly regulated system that doesn’t give the type of healthcare provider that you advocate for access to the marketplace. If we had a total free market, and if insurance was—if you could buy insurance coverage that would cover that kind of practitioner, if you were allowed to if you wanted to, and if Medicare either didn’t exist or covered every kind of healthcare, you in effect had a budget to spend any way you wanted, then you would have your way, Eben, and I would have my way. So I couldn’t agree with you more, except it’s only when the government intrudes that you can’t.
And to use my example of food, people in my judgment—I grew up eating macaroni and cheese and thinking that the people who catered my high school cafeteria were the best chefs in the country. So I grew up with a very pedestrian palate, and I don’t buy this fancy exotic food, I don’t like it, it doesn’t appeal to me. But you are free to do it if you wish because the food market is unfettered by regulation. People can simply buy what they want. So Eben, I agree with you 100% and thank you very much for your comment. Now Will, you can criticize, comment upon, or warmly embrace what I have just said.
Will Wilkinson: I wouldn’t say, Bob, that the food market is completely unregulated because it is not. There are trade barriers, so you know, it’s still a pretty regulated system. On the question of healthcare, yeah, I mean I think my answer goes similar to yours. I don’t favor privatizing Medicare say at this point, but it is the single most expensive thing that the government does. And one of the reasons that Medicare is so expensive is because healthcare costs have gone completely out of control. And one of the reasons they’ve gone completely out of control is because the system basically doesn’t work as a market. There are no transparent prices, there’s very little competition, it’s a bunch of little cartels and prices are just kind of set arbitrarily.
And so it has gotten way, way, way too expensive. So if I were just redesigning that kind of system, it would include a lot of the deregulation of the system, try to free up—you want a price system that people can respond to prices, you want them to be able to be able to choose between different providers, you want a level of deregulation that allows people to try out therapies that might not be covered by the kinds of plans that we have today. And that kind of system could be a lot cheaper but overall as effective as the kind of system that we have now.
One of the reasons why I said before that I’m not in favor of bigger government is because I think we can do a lot of the big government welfare state stuff much more efficiently and much more cheaply, but also more effectively. So the healthcare system is a great example of that, where it’s just massively expensive largely because it’s so choked with regulation. And so even if we’re still committed to the government being the backstop and making sure that everybody has healthcare coverage, we can do that in a way that costs taxpayers a lot less without reducing the quality of healthcare services that people get.
Caller: Geopolitics and the China Debt [25:02]
Bob Zadek: And our friends out there will detect a fault line, a famously used line in the sand or red line, where Will said he favored the government being some backstop in the providing of healthcare, some provider of some core minimum amount of healthcare. I have a difficult time embracing such a concept. I could kicking and streaming be brought into the program if it was run the right way, but we start off, Will, as having an irreconcilable line in the sand, but it’s okay, we’re still friends.
Now we have another caller, Jacob. Jacob on the line this morning. Good morning, Jacob. How can we help you this morning?
Caller (Jacob): Yes, gentlemen, your political beliefs seem to be operating or are being conditioned by what you want economically. And I think you have to consider regarding your touching on political realities, instead of the Obamacare recent talk coming from Nikki Haley, the United States Ambassador to the United Nations, expressed the US government’s disappointment in the effectiveness of the Chinese government in making a good effect upon the problem of North Korea and their intransigence and the threat to world peace. So she said we’re going to have to reconsider our relationship to China. If the worst-case scenario, the most extreme position scenario is chosen, is that also going to be economically disruptive and that’s going to affect your political beliefs?
Bob Zadek: Jacob, say a little bit more. How would our readjustment of our relationship with China, how might that, other than economically with tariffs and a trade war, which we all ought to live in dire fear of—other than a trade war, how might the geopolitical climate, especially North Korea, have an economic effect?
Caller (Jacob): Unfettered capitalism is the idea, but are we also in some way having fetters that are made in China and we have to break these fetters? Is that what Ms. Haley is suggesting, that we’re going to break the fetters, we’re going to be free from the negative and harmful effects of the irresponsible diplomacy or lack of diplomacy of the Chinese government?
Bob Zadek: That’s a complicated question. It’s interesting, I never heard—I’ve heard the phrase “unfettered,” I never thought until this second whether there was such a thing as “fettered,” which is the absence of unfettered. But I don’t see, Jacob, you raise—I’m going to race to my thesaurus as soon as the show is over to see if you can have something which is fettered without—I don’t even know what that means, but we’ll figure it out after the show. But I think—go ahead, Will.
Will Wilkinson: I was just going to say that our economic fortunes are quite tied up with China’s. I mean, we rely a great deal on imports from the Chinese. And so that’s an important thing. And if we did end up in a trade war, that would have a huge effect on our economy. The cost of many, many, many different kinds of goods would go up a great deal.
The more difficult geopolitical problem with the Chinese in terms of the economy is that more than any other single country, they hold a huge amount of US debt. So one of the problems with the way we do big government spending is that we spend a lot that we don’t take in in terms of revenue, and so we finance it through selling treasuries, and China owns a ton of them. And that gives them a lot of leverage over us. If the Chinese decide to just unload their portfolio of American bonds, that could have a big effect on world financial markets and also on the US’s ability to finance its own spending. And so these are really, really complicated issues that there’s not a simple ideological answer to given the way the system actually works. You might like to have a different system that works a different way, but that’s often not a very useful baseline to refer to when trying to think through what the actual problem is that we have with respect to our attachment to China economically.
Why Target the GOP? [27:52]
Bob Zadek: I love the fact, I love the fact that China owns so much of our debt. I love it because if somebody owes you money, you want them to stay alive and to prosper so they can pay you back. I am in my day job, I am involved in commercial credit, and I’m also in businesses, I borrow from banks. And I know when I borrow from a bank, every night that that banker goes to bed, he lights a candle and hopes that I prosper so I can pay him back. So I like the fact that China is rooting for me as a country to succeed.
Now Will, Jacob, thanks again for your call this morning. Now Will, we’re going to run out of time very shortly, but let’s summarize by you—one last question. You have written your piece and you have spoken on this show about what you believe to be the way for the GOP to achieve more economic success. Tell us why—here’s an interesting question, at least to me—tell us why you have selected the GOP as the better vessel to carry the libertarian message. After all, the libertarian message appeals a lot or should appeal a lot to Democrats. Why aren’t you writing to Democrats and explaining to them that if they embrace a low-regulation environment, we get to the same place? And Will, we have about a minute and then we’re going to go to closing.
Will Wilkinson: That’s a great question. I mean, this was addressed to the Republicans right now because they’re the ones who are in power. If Democrats were in power, I’d be addressing a similar argument to the center-left. The argument would have different contours because on the Democratic side of the aisle, there is a real ideological commitment to the necessity of heavily regulating the economy. Republicans at least, even if they’re hypocritical, tend to concede that it would be better to have a less regulated economy. And so the way you would make the argument is going to have to be different. But if Democrats end up taking both houses of Congress and the White House, I will be taking pretty much the same argument to them.
Bob Zadek: This is Bob Zadek thanking Will Wilkinson for joining us for an hour and sharing his wisdom. You can follow Will at @willwilkinson, W-I-L-K-I-N-S-O-N. Also please follow his writing on Vox, “The Big Idea.” This is Bob Zadek saying so long for now. Thank you very much for joining me. I hope you all have a very nice Sunday, and sure as anything, I’ll be back next Sunday with another hour of ideas, not attitude. Have a nice Sunday, everyone.