Voice For Liberty

Tag: Regulation

  • Citizen lawsuits won’t enhance chemical safety

    Legislation currently under consideration in Congress will allow citizens to sue the Department of Homeland Security if they believe that chemical plants are not in compliance with new regulations.

    The new regulations — IST, or Inherently Safer Technology — are troubling enough, in that they may actually work against their stated goal of safety. Allowing citizens to bring lawsuits based on these regulations will create many problems.

    In a Washington Times piece, two Washington lawmakers explain the risks and dangers that this law will bring about:

    • “… civil lawsuits would necessitate DHS diverting its limited resources from its core mission — protecting American lives from terrorists.”
    • “… civil lawsuits, and the discovery process involved, could very well lead to the public disclosure of sensitive — even classified — security information about U.S. chemical facilities and DHS’ assessments of those facilities.”
    • “To allow civil lawsuits against DHS in this area has the real potential to make the American people less safe. DHS itself has warned Congress of the potential consequences.”

    The Endangered Species Act contains provisions that allow for citizen lawsuits. The result? The authors write: “As a result, biologists then divert their attention away from protecting species to responding to the lawsuit and reacting to any judicial decisions. In 2002, this brought the Fish and Wildlife Service to a standstill.”

    Let’s not saddle the Department of Homeland Security with the same burden.

  • Chemical plant security should be based on technology, not politics

    As Congress considers legislation that would force our nation’s chemical plants to make expensive changes in their processes and technologies, we need to make sure that we don’t cripple our economy just to appease a small group of environmental activists — all in the name of purportedly greater safety.

    That’s the danger we face from IST, or Inherently Safer Technology. What could be wrong with a law that contains such a noble goal as safety? It has to do with the complexity of a modern industrial economy providing the backdrop on which unintended consequences develop. A recent article in The Hill explains:

    IST is governed by the laws of physics and engineering, not the laws of politics and emotion. A reduction in hazard will result in a reduction in risk if, and only if, that hazard is not displaced or replaced by another hazard. Even if it were possible to simply switch from one chemical to another, switching often results in the mere transfer of risk from the chemical plant to some other entity, perhaps the surrounding community, with no actual risk-reduction registered. For example, a government mandate that forces a company to reduce the amount of a particular chemical at a facility could very well result in an increase in transportation and safety risk. The company still has to maintain the same level of production capacity and the only way to maintain current capacity is to increase the number of shipments — through the community — going into the chemical plant.

    The article also states that there’s no objective way to measure the notion of “inherently safer.” But there is an objective way to measure the costs that IST will impose on manufacturers and our economy. It’s a huge cost, both in terms of dollars and lost jobs. Even the Wichita water treatment plant is on a list of facilities targeted by environmental extremists as dangerous.

    Chemical manufacturers, says the author, aren’t opposed to safety. In fact, the industry places great emphasis on safety and has spent billions on plant security since 9/11.

  • ‘Political capitalism’ explained in Wichita

    In Wichita this Monday, Robert L. Bradley, Jr. explained the state of capitalism in America today, using his experience working in a high-level position at the failed energy conglomerate Enron as a backdrop.

    Bradley asked: What happened to business prudence? What has happened to capitalism? The answer is that what we have today is not free market capitalism. Rather, it’s a very different type of capitalism: political capitalism.

    A common question today is has capitalism failed? Problems are automatically blamed on greed, self-interest, and profit maximization — in other words capitalism.

    Historically, robber barons have been condemned as examples of capitalism out of control. But many “robber barons” such as Rockefeller made money through voluntary transactions with their customers, Some, however, lived off special government favor such as tariffs. That’s political capitalism.

    Then during the Great Depression capitalism was blamed again. At that time, however, the Federal Reserve Bank was already in control, and this era saw the rise of other forms of government interventionism.

    Today our problems are commonly blamed on self-interest and capitalism rather than government.

    What is real capitalism vs. American-style political capitalism — the mixed economy where government intervenes heavily in business and the economy?

    Enron is still the premier example of political capitalism. But not many knew the full extent of Enron’s activities, or they though it was okay: “Enron was everyone’s favorite company.”

    But the company that everyone thought was the best turned out to be the worst.

    Bradley said the moral of Enron is deeper. There was a systemic failure surrounding Enron. All the gatekeepers — regulators, auditors, legal counsel, the business press, credit rating agencies, business professors — all failed at the same time.

    Many critics said that Enron refutes all that is good about free markets. Bradley quoted one business ethics professor: “The Enron value set was an extreme laissez faire ideology of absolutely free unregulated markets.”

    Bradley disagrees with this assessment, however. Enron was all about Ken Lay, “a master political capitalist.” Lay was a PhD. economist with a lot of Washington experience. His business model for Enron was regulatory change. If Enron could direct the change, it could gain the “first mover” advantage.

    Bradlet quoted a definition of political capitalism as “The utilization of political outlets to obtain conditions of stability, predictability, and security to allow corporations to make reasonable profits over the long run.”

    Socialists, he said, believe that when there is private property, its owners will be in bed with politicians in order to gain special favors.

    Enron’s profit centers had to do with regulatory change. Enron was the first major United States company to proclaim that the climate was in crisis and that government intervention was needed to reduce greenhouse gases.

    But it was a self-interested position. Enron rescued the domestic wind power industry by purchasing a company in that industry, and getting a mandate from the Texas legislature for renewable power mandate.

    Today, the Obama energy plan has a lot to do with Enron’s public policy thrust.

    Enron also gamed regulatory systems. By manipulating accounting rules, Enron could show accounting profits where there were no true economic profits.

    In the tax department, Enron used boutique accounting and legal firms to find niches in the tax code that could be exploited.

    The lesson is that these regulations may not be providing investors useful information and protection, although there may be an illusion created. A corporate report from the 1930s of just three pages gave investors more useful information, and held the firm more accountable, than did Enron’s last corporate report of 56 pages. The lesson, Bradley said, is “simple rules for a complex world.”

    So how did someone like Ken Lay get to the top of the business world? How did he fool everyone and bring down all the gatekeepers with him? Bradley said the government side of the mixed economy was the factor that created an environment that could be exploited.

    The lesson is that the rise and fall of Enron discredits the mixed economy and political capitalism.

    A question was asked: What should we do? Bradley said we should support public policies that are market-oriented, instead of supporting government intervention. But given the mixed economy, we need to watch out for artificial incentives.

    Afterwards, I asked Bradley about government intervention at a local level, such as in Wichita. Specifically, what about TIF districts and tax abatements? Are these examples of political capitalism? Bradley said yes, these are. A side effect is that a tax abatement does leave money in the private sector instead of the government public sector. But a special favor means an artificial stimulus that encourages malinvestment.

    I asked if we need more regulation to protect us, or is our current regulatory regime sufficient? Bradley mentioned that in the Bernie Madoff scandal, the defrauded investors are as mad, or more mad at the Securities and Exchange Commission, that they are at Madoff himself. Many figured that the SEC, with its thousands of regulators, had done their homework for them, and that Madoff’s company was safe. This represents a major unintended consequence of regulation.

    Much more information about this topic can be found at Bradley’s website Political Capitalism. His recent book is Capitalism at Work: Business, Government and Energy.

  • Chemical security bill passes committee

    On Tuesday, the United States House Energy and Commerce Committee’s Energy and Environment Subcommittee passed H.R. 2868, the “Chemical Facility Anti-Terrorism Act of 2009.”

    This bill contains provisions for Inherently Safer Technology (IST). These regulations seek to force companies to replace existing methods and raw materials with those deemed to be safer. But the legislation may not produce its intended effect. Congressional testimony found that this could actually increase risk to the businesses that the bill intends to protect.

    The problem, as with much government regulation, lies in the unintended consequences. The article Inherently Safer Technology (IST) not always that explains how these regulations can work to increase the real danger that Americans might face. In this example, a switch to a different input chemical would mean many more chemical tanker trucks would be on our nation’s highways.

    Chemical manufacturing and processing is a complicated matter, and mandates that force the use of one chemical instead of another can have consequences that lead to less safety, not more.

    In a letter to Henry Waxman and Joe Barton, Chair and Ranking Members of the House Energy and Commerce Committee, Charles T. Drevna, the president of the National Petrochemical & Refiners Association, told how “The bill’s IST provisions may result in simply transferring risk to other points along the supply chain instead of reducing risks as intended.”

    He also said that these mandates will increase cost: “Not only will IST mandates fail to reduce risk, but they will also impose significant financial hardship on refiners and petrochemical producers struggling in the current economic recession. In addition to the fact that mandated switches may not reduce risk, some estimates indicate that forced changes could cost in the hundreds of millions of dollars per facility.”

    There are existing regulations that have been effect for some time, and have proven to work. As one industry group wrote earlier this year: “The current chemical security regulations are enforced by the Department of Homeland Security, which has clear authority to inspect facilities and apply strong penalties for non-compliance. Since the regulations have been in place, not one incident as a result of terrorism has occurred. These regulations have been effective.”

    We have working regulations in place. So why are we contemplating more burdensome regulations that will surely increase cost, while at the same time increasing the risks Americans face?

  • John Stossel urges reliance on freedom, not government, in Wichita

    John Stossel in Wichita, October 12, 2009John Stossel at Wichita State University

    Speaking at Wichita State University on Monday, former ABC News journalist John Stossel told a large crowd that free markets and limited government, not more government, are the best way to increase our wealth and prosperity.

    Speaking about his beliefs early in his career as a journalist, Stossel said, “By and large it’s [capitalism] cruel and unfair. We need government and lawyers to protect us from capitalists.”

    Eventually, he said, he began to realize the harm in excessive government regulation. Bureaucrats who propose licensing auto repair shops don’t do much to protect consumers. Instead, the cost of regulation and licensing makes auto repair a little more expensive — leading, perhaps to shops in poor neighborhoods going underground to escape regulation.

    So could trial lawyers do a better job of protecting the consumer? They have the ability to make bad guys pay. But Stossel said the best deterrent is the free market and competition. “Word gets out,” he said, and if you cheat your customers, they won’t come back. There’s also fraud laws.

    Stossel said that it’s easy for reporters to cover the victim who wins a large reward in a lawsuit. The unintended consequences, however, are harder to see. But they’re everywhere. He cited the reduction in the number of vaccine companies due to lawsuits, asking are we safer with five vaccine companies researching vaccines rather than 20? No, he said, we are less safe.

    Competition through free markets, he said, protects us all by itself without government intervention. There are exceptions — Bernie Madoff, for example — but the fact that these exceptions receive so much media attention is evidence of how well markets work.

    The way to get rich in America, Stossel said, is to serve consumers well, citing the example of Bill Gates.

    Stossel said that critics of free markets say that they don’t work for complicated things such as schools and health care. Don’t we need wise elites in Topeka and Washington to make decisions for us, he asked?

    The answer is no. Not everyone needs to be an expert. It’s sufficient for there to be a few “car buffs” — using the example of selecting an automobile — for free markets to work.

    We need some government, he said, to provide rule of law, to protect our property and person. But government needs to be limited. He showed graphs that illustrated the rapid growth of government spending since the presidency of Lyndon Johnson.

    “I’d say they were spending like drunken sailors, but that insults drunken sailors, who spend their own money.”

    He cited his own experience with his beach house, where government provides low-cost flood insurance. His beach house — right on the ocean, built on sand — was damaged. But the government insurance replaced it.

    The problem, he said, is that this insurance was not priced properly. Government ignored the price signals sent by the private market, which set high prices for this insurance, based on the risk they judged the properties faced. The below-market prices set by government have lead to a program that is billions in the read.

    Stossel said that in every newsroom he’s been in, and at all the elite universities he’s visited, people hate business. It’s intuitive, he said, to think of business as a zero-sum game. “If somebody makes a profit off me, I must be losing something.”

    But business is voluntary. Government is force. Business doesn’t happen unless both parties think they win, leading to the “double thank you” moment at the time of the transaction.

    Business is not like a pie, where if someone takes a big slice, there’s less for others. Business, he said, creates more pies. Entrepreneurship makes us all richer, but that’s not intuitive, he said.

    He also talked about his experience reporting on the risks we face in the world. He found that news media focused its reporting on sensational events such as airplane crashes that are actually quite rare. Flying takes an average of one day off each person’s life, statistically speaking.

    But driving takes an average of 182 days off of life. And because of the “hysterical coverage” of plane crashes, people are scared into driving instead of flying. Stossel termed this “statistical murder.”

    (Later, in response to a question, Stossel said that this type of reporting was difficult to get on the air. Two producers quit, saying this reporting was not journalism, but “conservative dogma.”)

    The most important danger to life, however, is poverty, taking over 3,000 days (about nine years) off a person’s life. “Wealthier is healthier,” he said. Regulation that prevents capital from flowing to its best use makes us poorer, he said, and fewer people get hired. Perhaps the headline should be “New OSHA rule saves four, kills ten,” he said.

    Our lack of perspective has made America fear innovation, Stossel said. He referred to Europe’s precautionary principle, which really means “don’t do anything for the first time.” He illustrated a mythical new product — a new fuel, domestically produced, but explosive, invisible, and poisonous, and would kill 200 people each year. And, he wants to pump it into your home. Would we allow that today? This product, of course, is natural gas.

    The innovation that we now fear has made our lives richer. Free people pursuing their own self-interest make America richer, and that saves lives.

    Questions in written form from the audience included one asking Stossel who in Washington he considers to be a leader in free market philosophy. He mentioned Ron Paul as a politician, and the Cato Institute as a leader in explaining the benefits of free markets.

    About the myths and lies of health care reform: Stossel said that President Obama is right, the current system is unsustainable, as it “promises everybody everything free.” The proposed reforms are likely to make the current situation worse. He mentioned that the rate of increase in spending on recreation is the same as the increase in spending on health care. No one complains about spending on recreation, though, because they’re spending their own money. It’s when government spends our money that problems arise. Also, other countries freeload off the innovation that happens in America, and they don’t bear that cost.

    At ABC News, Stossel said they rejected his stories about health care in favor of Michael Jackson stories. He believes this will improve at his new home at Fox Business Network.

    One of his favorite stories was “Stupid in America,” which took a look at public schools. American students do fine in fourth grade, Stossel said, but as time goes on, our students lag behind students in other countries. “The longer they are in our public school system, the worse they do.” The problem, he said, is that our public school system is a government monopoly. An important factor in the success of schools in other countries is that the money is attached to the student, not the school, as it is in America.

    In an interview session before his talk, I asked Stossel about the events of the past year: Is this evidence of the failure of free markets and capitalism? Referring to the rise in the Dow Jones average from 800 to over 9000 since 1982, he said that’s pretty good. “Perfect is not one of the choices,” and there will be booms and busts, he said. Plus, this bust was mostly a government bust, with Fannie Mae and Freddie Mac contributing.

    I asked about regulation, and Stossel said that regulation increased greatly during the Bush administration. Republicans say they want to cut spending and rules, but they don’t do it, he said.

    About health care in Canada, Stossel said that Canadians like their system and think ours is horrible. But media reporting has exaggerated the defects of the American system, and most of the people surveyed in Canada aren’t sick. Also, Canada reduces their cost by freeloading off American innovation.

    At Fox Business Network, Stossel said he will have a show once a week “talking about the economic liberty that made American prosperous.” He also said that “I’m angry that smug people are claiming that central planning from government will make our lives better, despite the evidence in our face that it’s failed again and again.” He plans to confront these people.

    I asked if we in America are starting to look more to a European style of security, rather than relying on freedom. Stossel said yes, quoting Thomas Jefferson as “It is the natural progress of things for government to gain, and liberty to yield.” But it is a false sense of security to rely on government. Real security and what has made America prosperous is the innovation that comes from capitalism.

    Addional coverage from Kansas Watchdog is at John Stossel’s 20/20 Vision of Journalism and Free Markets.

  • Kansas protects its gambling interests

    At one time Kansas prohibited its citizens from gambling because it was thought to be immoral. That attitude started to change when Kansas allowed a lottery. Now that the state owns casinos — that’s right, in Kansas the state owns the casinos that aren’t Indian casinos — thoughts of morality have been swept aside. Or, at least, we’ve decided that the potential revenue inflows to state coffers is more important than the moral health of Kansans.

    Now that Kansas is in the business of gambling, it’s working to protect the monopoly it granted itself. In Wichita, entrepreneurs sought to get around gambling laws by offering a variation of poker that they argued was legal. A judge disagreed, and the game was shut down, preserving the monopoly of the state in gambling.

    Having settled the question as to whether gambling is moral, we now see that this case is all about the money. The state doesn’t like competitors.

    The state is willing to look the other way on smoking too, when it comes to the potential of earning more revenue from its casinos. Earlier this year the Kansas senate considered a state-wide smoking ban that allowed smoking in its casinos.

    Is this another example of Kansas hypocrisy: smoking should not be allowed, except where it might reduce the state’s gambling revenue?

  • Causes of global finance crisis explained in Wichita

    Today, an audience of 600 business and civic leaders attended the 30th annual Economic Outlook Conference at Century II, produced by the Center for Economic Development and Business Research (CEDBR) at Wichita State University.

    The featured speaker was John A. Allison, chairman and former CEO of BB&T Corporation, the nation’s 10th largest financial-holding company. Its headquarters are in Winston-Salem, North Carolina.

    The primary cause of the recent financial crisis is our federal government’s policies and actions, Allison said.

    It’s not the fault of free markets, as some allege, because we don’t have a free market economy. We have a mixed economy, with some industries such as financial services being highly regulated by government.

    What was the cause of the real estate bubble? We built too many houses, many of larger size than we should have built, and we built them in the wrong places, he said.

    How did we make such a mistake? Allison said there are four causes or actors that contributed to the problem: the Federal Reserve Bank, the Federal Deposit Insurance Corporation (FDIC), housing policy as implemented by Freddie Mac and Fannie Mae, and the Securities and Exchange Commission (SEC).

    The action of these agencies turned a natural correction into a panic. Also, the policies government has taken since then may help us in the short term, but will almost certainly hurt us in the long run.

    The Federal Reserve’s errors include creating inducements to take risk based on false signals. The inverted yield curve that Fed Chairman Ben Bernanke created induced banks to take on more risk than they had been assuming. Also, “The huge level of federal debt we have today would not be practical if the government did not own the monetary system.”

    The Fed has sophisticated financial models to help it manage the economy, but these can’t integrate the economic activity of billions of humans. Illustrating this, Allison mentioned Frederich Hayek’s “fatal conceit,” where smart people believe they can do the impossible.

    The FDIC contributed to the problem by allowing start-up banks to offer high interest rates to depositors. With FDIC insurance, depositors don’t have any incentive to investigate the soundness of the banks in which they place their deposits. This has led to a lack of market discipline.

    Government housing policy has been a long-term problem. Spurred by the theory that home ownership for everyone is a good thing, in 1999, the Clinton administration announced that it would be the goal of Freddie Mac and Fannie Mae to have at least half their loans in so-called “affordable housing,” now called sub-prime mortgages.

    At the time, economists, including liberal economists, warned that this is risky, and that this course could take them down, and the U.S. economy with it within ten years. Nine years later it happened, Allison said, and the government was forced to bail out these two agencies.

    Politics played a role in this. Allison said he served on financial services roundtable committee for nine years. This committee warned Congress numerous times that it was certain that Freddie Mac and Fannie Mae would go broke. But Congress wouldn’t listen. Part of the reason was the political contributions to both Democrats (that party’s single largest contributor) and Republicans made by these two agencies.

    Fair value accounting regulations, particularly mark-to-market, led to inaccurate valuation of some assets when markets are thin (not many buyers). When banks were forced to mark down the values of assets more than what economic reality indicated, the loss of capital was multiplied, because banks are leveraged. This lead to larger losses in lending capacity that what was necessary.

    Banks with cash might be willing to assume the economic risk of purchasing some of these assets, but they couldn’t assume the accounting risk of future losses. This is an example of the distortions produced by our government-created accounting system, regulated by the SEC. Large and even small businesses don’t use this accounting system for their own management, because it’s not a good measure of value.

    The actions of Freddie Mac and Fannie Mae also led to the end of the “originate and hold” model for home mortgages, where banks and thrifts would make home loans, and then hold those loans as part of their portfolio of assets. Private institutions simply could not compete with these government-backed institutions.

    This led to the “broker model” or “originate and sell,” which had a terrible incentive. If you simply originate loans but don’t hold them and its risk, your incentive is to originate as many loans as possible, without regard to the riskiness of the loan.

    Summarizing the first part of Allison’s lecture: It is government policy that is largely responsible for the crisis. Free markets are commonly being blamed for the crisis, but this assessment is false. Our economy, as Allison has shown, is far removed from free and unregulated. Government intervenes everywhere.

    Allison presented a great deal of information in his talk, including some steps we should take to get out of this crisis and to prevent another. I’ll report on this soon.

  • The good thing Senator Ted Kennedy did

    John Berlau reminds us of the legacy of Senator Edward M. “Ted” Kennedy:

    Most tributes to the “Liberal Lion” focus on his accomplishments at expanding government spending and regulation. And indeed, those were the bulk of his achievements.

    But for a brief, shining moment, in the mid to late 1970s, Kennedy viewed smaller government as the most compassionate answer in one area of economic life: transportation. Kennedy was the prime mover in Congress behind the airline and trucking deregulation bills that were signed by President Jimmy Carter. He saw the impact of regulation in these industries as protecting entrenched companies from competition, and decided that the liberal, compassionate thing to do was to deregulate to give consumers lower prices and more choices.

    The full article is at Ted Kennedy’s Deregulatory Legacy on Airlines and Trucking.

  • The real right to medical care versus socialized medicine

    In 1994, George Reisman wrote a pamphlet explaining the problems with America’s health care system. He criticized the Clinton plan for reform, and offered an alternative based on freedom and markets rather than government interventionism. It is a brilliant work, and still relevant today: “I wrote this essay to help defeat the Clinton plan for socialized medicine. In all essentials it’s as valid today as it was then. It’s a demonstration that government intervention inspired by the philosophy of collectivism is the cause of America’s medical crisis and that a free market in medical care is the solution for the crisis. I urge everyone who wants to help defeat the essentially similar Obama scheme to read it.”

    You can read the pamphlet by clicking on The real right to medical care versus socialized medicine. It’s lengthy, at about 22,000 words. It takes a while to read. Part of what accounts for its length is Reisman’s explanation of every point he makes, which is very helpful.

    Reisman calls for more than simply defeating the Clinton plan, as we who oppose the Obama plan should be doing too. He calls for reform — radical reform — of America’s health care, and presents a plan.

    By way of introduction, Reisman writes

    … while the philosophy of Marx and Engels is dying, the philosophy of Locke and Jefferson, and Adam Smith, that is, the philosophy of individual freedom and capitalism underlying the American Revolution — the philosophy which, ironically enough, was the original meaning of the word liberalism — has been reborn. It has been reborn first and foremost at the hands of Ayn Rand in political philosophy and of Ludwig von Mises in economic theory, both of whom have enormously strengthened it. This philosophy of individual freedom, of the inviolability of individual rights, of the benevolent functioning of an economic system based on private ownership of the means of production and the profit motive — of capitalism — calls for a radically new political agenda. It calls for a political agenda that progressively rolls back the interference of the state and progressively enlarges the freedom of the individual. This is now what political philosophy and economic theory at their highest levels of development recognize to be the essential means of solving social and economic problems. Movement in this direction — in the direction of individual freedom from government interference — is henceforth to be regarded as the standard of what is to be considered progress in the realm of political action.

    It is on the basis of this newly resurgent, radically different political philosophy and economic theory — this philosophy and theory of individual rights and capitalism — that I explain the causes of the present crisis in medical care, criticize the Clinton plan, and present the appropriate solution and how to achieve it.

    The fundamental problem is this: “… the perverted notion of the need-based right to medical care — that is, an alleged right to medical care that entails a claim on other people’s wealth or labor, which must be met with or without their consent — is what underlies both the collectivization of medical costs and the concomitant loss of the individual’s personal financial responsibility. In this way, it is a perverted notion of the right to medical care that is fundamentally responsible for the rising cost of medical care.”

    Reisman goes on to explain, in detail, how the present system of purchasing health care leads to a variety of problems, such as “the potential for a limitless rise in the price of medical services” and “irrational medical malpractice awards and the practice of defensive medicine.” Most people seem to agree that these problems are present. He also explains how the present system is “perverting technological progress into a source of higher costs rather than lower costs,” how it is responsible for high drug prices, and how hospitals waste money buying costly equipment that is not needed.

    He also explains “bureaucratic interference with medicine and the rise in administrative costs,” characteristics of private health insurance companies that those who support government takeover rail against.

    Reisman then criticizes the details of the Clinton plan. These apply equally to the Obama plan.

    Then, Reisman proposes his solution. It’s not more government, which is what Obama offers. It’s less government and restoration of individual rights:

    The actual solution to the problem of runaway medical costs lies in the precise opposite of the direction chosen by the Clinton plan. It is not the final destruction of the individual’s rational right to medical care, which is what the Clinton plan would achieve, but the restoration and full implementation of that right — that is, the removal of all government interference that stands between buyers and sellers of medical care or in any way causes medical care to be more expensive than it otherwise would be.

    The best way to accomplish reform, Reisman writes, is: “The simplest, most obvious method of achieving a free market in medical care would be at one stroke to abolish all government intervention that violates a free market in medical care.”

    Recognizing that this is not likely to happen, Reisman proposes some steps to take.

    The first is a change in the tax laws that would have the effect of “[having] employees realize that they were responsible for the cost of their own medical care, even if the employer continued to pay insurance premiums on their behalf. This is because the individual employee would know that he could have his share of the money his employer paid on his behalf, in his own pocket if he wished.” In other words, dissolve many peoples’ notion that their health care is free (or very low cost) just because they get it as part of their job.

    Next, end the idea that Medicare is a free resource: “… unless they can demonstrate a lack of means, individuals covered by Medicare be required to pay a substantial deductible before their coverage under the program begins and then to make a continuing copayment of a significant percentage of all costs beyond some maximum limit. ”

    To increase the supply of health care, “it is certainly reasonable to ask that medical licensing laws be liberalized — nothing so extreme, mind you, as their outright abolition, but merely their significant liberalization.”

    To control hospital costs, a radical reduction in the regulation hospitals face is required.