Third Way Politics = Bad Policy

Roundup: Media's Take

Michael Chapman, editorial director of the Cato Institute (Feb. 13, 2004):

The Third Way-a mix of capitalism and welfare-state socialism-is the dominant political philosophy in Europe and parts of Asia. Britain's Tony Blair is a Third Way-er, as is America's Bill Clinton. Unfortunately, in many ways, so is President George Bush. His brand of Third Way politics is called "compassionate conservatism." The Democratic Leadership Council terms its version "tolerant traditionalism."

In either case, the tack is the same: steady, incremental steps toward more governmental control over society through myriad laws, regulations and taxes. The state doesn't take over private industries outright-it intervenes, to cover where the free market supposedly fails. As it does so, the state makes things worse, so it intervenes more to "fix" the problems it created, paving the way for more "reforms"-and problems. This interventionism is evident with health care, but it's also clear in the way that Bush and Congress treat other industries.

On Dec. 24, 2003, Bush signed bill passed by the GOP-controlled Congress that would provide prescription drug benefits to people on Medicare, the national health insurance program for seniors. The cost of this law, which (further) subsidizes prescription drug coverage, is now pegged by the White House at $534 billion over 10 years, up from the administration's $400 billion estimate last November. Some analysts project the cost at more than $1 trillion over 10 years.

Given the history of Medicare and other government interference in the health care market, $1 trillion is credible. Medicare is government intervention in the health care industry through subsidies, which boost demand and raise costs, and regulations, which further boost costs. With subsidies, someone else is paying most of the bill. Therefore, neither patients, doctors, hospitals, nor politicians have an incentive to control costs. As costs go up, prices go up. Then patients and doctors complain and politicians blame "greedy" drug companies and "ruthless" health care providers. So, their solution? More subsidies. And it starts all over again.

Medicare, launched in 1965, was the fruit of some 50 years of lobbying by national health insurance advocates, including Harry Truman and Theodore Roosevelt. "The program was created as part of a larger plan to create a government-financed national health care system," reports Sue A. Blevins in her book, "Medicare's Midlife Crisis." "Incremental steps were taken in 1965 toward that goal, including the establishment of Medicare Part A, Medicare Part B, and Medicaid, the government program for low-income individuals of all ages."

In 1965, the government estimated that the cost of Medicare Part A (hospital coverage) would grow to a mere $9 billion by 1990. Wrong. The program ended up costing $66 billion in 1990. The government mis-estimated by more than 600 percent. Total program costs reached $221.8 billion in 2000. Today, Medicare regulations fill more than 130,000 pages. And now you can tack on all the regs, rules, costs, demands, and higher prices that the new prescription drug "reform" will add. Look for Congress to fix this reform in a few years.

At least, one may argue, President Bush and Congress did not enact a national health care plan, as Bill and Hillary Clinton tried to do. But, as Blevins explains, Medicare is a national health care program, 39 years old and getting fatter by the day. The prescription drug reform is just further intervention, another step down the road toward a broader plan: a third way.

"There are middle-of-the-roaders who think they have been successful when they have delayed for some time an especially ruinous measure," said economist Ludwig von Mises of third way interventionism. "They are always in retreat. They put up today with measures which only 10 or 20 years ago they would have considered as undiscussable. They will in a few years acquiesce in other measures which they today consider as simply out of the question."

In 1982, President Reagan called for dismantling the Department of Education. In 1995, the GOP-controlled House approved a budget that called for eliminating three Cabinet departments: Education, Commerce and Energy. Now, nine years later, a GOP-controlled Congress and a "compassionate conservative" president have boosted spending on education to $57 billion, a 70 percent increase since 2002. Neither Bush nor Congress has any active plans to scrap any departments or agencies.

In the 1990s, the GOP Congress tried to eliminate the National Endowment for the Arts. Failing that, they capped its funding. This year, Bush has called for boosting the NEA's budget 15 percent, to $139.4 million. There are nearly 8,000 pork projects in the Omnibus spending bill, and corporate welfare-more government intervention in the marketplace-continues, to the tune of $100 billion.

Welcome to Washington. Welcome to the Third Way.

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