Tuesday, September 28, 2010

Central Planning is not Dead Yet

Liberal blogger Matthew Yglesias reflects on Brazil and offers us this analysis:
Either way it’s global movement toward a model in which the government intervenes in the economy primarily through tax-and-transfer functions rather than through planning. Nothing’s perfect in life, but this trend has served the world pretty well and I think both sides of the equation are very much necessary. This progressive liberal synthesis is taking over pretty much everywhere in the democratic world except the United States, where the GOP remains ideologically unreconciled to the welfare state
The first thing I noticed is that Yglesias also likes to pick on the GOP for wanting to protect popular spending programs like Social Security but not raise taxes.  Perhaps the GOP is conflicted about how to pay for the welfare state, but I'm not convinced that they remain "ideologically unreconciled" to it.

That aside, I couldn't help but think that if only his description of the state of affairs were accurate, how much better off we would be.  If everyone agreed that centralized planning of the economy is a bad idea and we could just debate how big a welfare state was right for America I think things would be much better and we would be in a position to tackle the fiscal challenges that lie ahead.  But I'm not at all convinced that this is really where we are at.

The health reform law offers a case in point.  Yes expanded coverage through government subsidies is a tax and transfer government program.  At the same time the Secretary of Health and Human Services, Kathleen Sebelius sent a letter to the health insurance industry stating explicitly that the government will have "zero tolerance" for "unjustified rate increases."  With the government, apparently, being the final judge of what is unjustified.

When the government sets the standard of what is an unjustified rate increase rather than market participants, I'd say that amounts to central planning.  I'm not sure the world that Yglesias describes, where we have once and for all learned the lesson that planning doesn't work, is one that comports with reality but if it did we'd all be the better for it.

No comments: