Sunday, September 13, 2009

The other trillion dollar "public option"

There's been a lot of discussion about the "public option" in the health care reform debate and whether it might ultimately wipe out the private insurance industry, leaving the public option as the only option.

The Wall Street Journal reports on the other trillion dollar program and the "public option" that has government taking over the student-loan market:
The Obama plan calls for the U.S. Department of Education to move from its current 20% share of the student-loan origination market to 80% on July 1, 2010, when private lenders will be barred from making government-guaranteed loans. The remaining 20% of the market that is now completely private will likely shrink further as lenders try to comply with regulations Congress created last year. Starting next summer, taxpayers will have to put up roughly $100 billion per year to lend to students.
This sounds remarkably familiar to what Obama wants to do with health care -- inserting government prominently into the market while imposing restrictions that make it increasingly difficult for private insurers to stay in business.
The [private student-loan] system broke down after Congress in 2007 legislated a return so low that no private lenders could make money holding these assets. To keep the money flowing to student borrowers, the government began buying the loans from private originators last year. But this larger federal role was intended to be temporary, with an expiration date next summer. The news from Washington now is that rather than scaling back federal involvement, the pols want the U.S. Department of Education to be the exclusive banker to America's college students.
This is the real concern over the health care "public option" -- that it will lead directly to a government monopoly on health care. Some Democrats have admitted that this is the intent, and Obama is on record as saying that this is where he'd ultimately like end up.

It's often argued that a "public option" is necessary to provide competition for private insurance companies. But it's not competition when one side is tax-payer subsidized and the other is told how they must run their business. That's a rigged game. It's what's happened in the student-loan industry, and what they want to see happen in the health care industry.

History has shown that, on a level playing field, government can't compete with the free market:
Loans directly from the feds have been available for decades, but the government's poor customer service has resulted in most borrowers choosing private lenders.
The only way the government can "compete" is to rig the game. We've seen this in public transportation, where private companies have been made extinct through regulation and price fixing. Public transportation is the "last man standing" because it never had to compete. It was allowed to soak up taxpayer dollars to subsidize its failing and inefficiencies. Similarly, the US Postal Service "competes" through the government making it illegal for private companies to deliver first class mail. Despite this, UPS, Fed-Ex, and DHL still make a profit, while the USPS continues to operate in the red.

As with health care, the rationalizations for the government running the show fall apart upon examination. The only way to get the programs through is to lie about the facts.
Democrats have already greased this fall's budget reconciliation to pass all of this on a mere majority vote. They are helped by rigged government accounting that disguises the cost of making below-market loans to unemployed 18-year-olds. . . .

[Congressional Budget Office] Director Douglas Elmendorf admits that government accounting is bogus. He writes that the statutory methodology 'does not include the cost to the government stemming from the risk that the cash flows may be less than the amount projected (that is, that defaults could be higher than projected).' Mr. Elmendorf further notes that the government's accounting system is specifically skewed to make direct loans from the government appear to cost much less than guaranteed loans made by private lenders.
It's a smoke and mirrors show. Unfortunately,
All of this is certain to pass the House, and the only chance for stopping it is in the Senate. If it passes, parents will soon have no choice beyond a Washington bureaucracy to borrow money for their college-bound children, and taxpayers will pay a fortune for the privilege.
It seems we're on a similar path for health care, at a cost of trillions, not to mention our freedom to choose what we will buy with our own money.

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