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Thursday, August 11, 2011

Economic Journal Article #1

As I previously promised, here is the first of 15 economic journal articles from Professor Noreen Van Valkenburgh's Macroeconomics course at Dutchess Community College. I wrote this entry on June 28, based on a story from June 21.

Gregory Koch

Article Title: "Man Robs Bank … For Healthcare?"
Date: Tuesday, June 21, 2011

Summary: 59-year old James Verone of North Carolina is accused of robbing an RBC Bank of $1. Verone, who has no criminal history, had an unusual motive for his crime - he couldn't afford healthcare but knew he would get it for free in prison. Verone had intended to be charged and convicted of armed robbery so he could be sent to prison until he was old enough to be eligible for Social Security. However, he was only charged with petty larceny and likely won't be sent to prison for long enough. Verone apparently had developed a life-threatening growth on his chest and ruptured two tendons in his back in addition to problems in his left foot. However, having been laid off from his job, he could no longer afford healthcare. He had hoped that by being sent to prison, the state would pay for his healthcare.

My commentary: As a libertarian, I feel that the government should not pay for anyone's healthcare. Prisoners are an interesting case because, just as a child is in the legal custody of his or her parents (who, in theory, should be the ones to pay for the child's healthcare), a prisoner is in the custody of the state. So, even some fiscal conservatives might still conclude that the government is responsible for the healthcare of prisoners even if they are against public healthcare in general.

Cases like this though, show what is wrong with the system. People like me, who have a conservative fiscal viewpoint, would say this is absolutely why we should NOT have government-sponsored healthcare. It only leads people to cheat the system to get the government to pay for their problems. However, some liberals could argue that this is why we DO need public healthcare - the fact that someone would need to rob a bank to get the government to pay for their medical needs shows what is wrong with society. While both sides would likely agree with that statement, I must differ with the liberals on the conclusion.

That being said, it is no coincidence that crime rates go up in winter. The book Freakonomics discussed this a little bit. While conventionally this is attributed to more hours of darkness, the authors concluded that this was not the case. They found, by analyzing the difference in temperature instead of the difference in daytime hours, that it was really due to the colder temperatures - presumably, the poor people knew that the only way they could get a roof over their heads, good healthcare, and three meals a day was to go to prison, so they did precisely that. Granted, the cities that have warmer winter temperatures are often located further south, and as such have longer daylight hours in the winter (and shorter in the summer). However, the authors specifically looked at cities where this wasn't the case. For instance, Seattle is warmer in the winter than Washington, DC, but DC is further south (thus longer daylight compared to Seattle). However, DC saw the higher crime increase.

The article also attempts to make a case for public healthcare, saying that it is no different from private healthcare because
"How do socialist systems pay for health care? Taxes are collected from businesses and citizens, and a portion of those taxes go to cover the health care costs of everyone in the plan - in other words, everyone in the country.
How do health insurance systems pay for health care? Premiums are collected from businesses and employees, and a portion of those premiums go to cover the health care costs of everyone in the plan."'

However, there are two fundamental flaws in this argument. First of all, it does not allow for choice. If I don't need top-notch private healthcare, I don't have to pay for it. I can't be forced to put money into a system I gain nothing from.
Second of all, one of the critical factors in this case is that Mr. Verone did not have a job, and therefore did not have a healthcare plan. However, one of the reasons there are problems with the economy is that the government is forcibly taking our money (aka "taxing us") to pay for social welfare for the unemployed. French economist Frederic Bastait introduced the concept of "the seen vs. the unseen" in his 1850 essay Ce qu'on voit et ce qu'on ne voit pas. While on the surface level, the poor appear to benefit from welfare programs, in fact it does not help them significantly and hurts the economy as a whole. Bastait points out a smaller-scale scenario: suppose you live in a town with 100 other residents. The other 100 residents all have jobs paying $35,000 a year and you have no job and consequently earn nothing. The government can opt for the social welfare option and take $350 from everyone through taxes, and give it to you as a "welfare program". This is similar to what governments do now - it is the "seen". You now have $35,000, which is significantly better than you were before, and everyone else only loses 1% of their income, which isn't much. However, this doesn't take into account the "unseen" -what would happen if not for the taxes. Everyone's $350 would go back into the economy, and in the long run, instead of the $35,000 going to you to do absolutely nothing, it will create a new job market and you will be able to get a job and be paid $35,000 to contribute to the economy. This in turn will allow the economy to grow, which will create more jobs, and so on. So, in an America without social welfare programs, then assuming the government didn't use the tax revenue for some other form of wasteful spending and instead gave the taxes back to the people, the economy would be better off, and, aside from deliberate bums, in the long run nobody would be worse off. -

So clearly our system is broken. We should not be rewarding people who cheat the system. We should certainly not be rewarding people who commit a crime to cheat the system (that is, another crime in addition to fraud for the said system cheating). Increasing public healthcare will only lead to more cheating of the system. We already see it with other public welfare programs such as foodstamps. Most people receiving food stamps should not be eligible, but they fudge or fake data so it seems like they are. And often, they will turn down marginally-paying jobs that will take them just above the threshold to ensure that their eligibility continues. Privatizing welfare programs would lead to less system cheating   and stop wasting our tax dollars. Mr. Verone's situation is very sad, but the system involved is even sadder.

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