Because It’s the Politicians’ Money

Writing on Obama’s claim he would pay for politically-managed health care by eliminating waste, fraud and abuse, Megan McArdle says:

Ah, our old friends, waste, fraud, and abuse, the bane of politicians everywhere.  Based on the number of politicians I have heard during my adult lifetime promising to generate massive savings from cutting waste, fraud, and abuse, I estimate that this diabolical trio accounts for approximately 113% of all Federal spending.  The percentage may be even higher at the state and local levels.

I learned what a scam this was back in my wayward leftist youth when I observed that rightwing politicians loved to claim they would pay for tax cuts, without reducing benefits, by eliminating waste, fraud and abuse.

Of course they never did, and as I grew older I realized that no one ever believed that politicians could find savings of 10%+ in massive government programs as quickly as they could cut taxes. Instead, the “eliminating waste, fraud and abuse” claim served as a ritualistic fig leaf so that politicians wouldn’t have to answer the question of where the real money was coming from.

The argument is especially ridiculous because it implies that there are a lot of politicians who don’t care if government programs are wasteful. Some people think it is true because politicians aren’t spending their own money but rather that of the people. However, from the point of view of politicians as a class, once the government has taxed or borrowed the people’s money, that money then becomes the politicians’ money in the sense that the politicians will use that money to buy votes. Politicians have no more incentive to waste government money on inefficient government practices than a business owner does to use money-wasting practices in his business.

If politicians can make government programs more efficient they will, so that they will have more of “their” money to spend on other vote-getting projects. Even if politicians don’t like a program, they still has a built-in incentive to make it as efficient as possible so that they don’t have to waste “their” money on it.

If Obama is capable of finding huge savings in medical care he should go ahead and just do it. If nothing else, he should do it on a small scale and demonstrate it is possible before basing the entire national health-care system on the premise. Of course, just like the rightwing tax cutters, he can’t. Just like the rightwing tax cutters, he just wants a fig leaf to get his program passed and leave everyone stuck with the bill.

2 thoughts on “Because It’s the Politicians’ Money”

  1. I’ve also read, oh somewhere on the internets, too lazy too look for links now (or busy, even) that some of the vaunted low admin costs of Medicare actually allow a lot more fraud and abuse.

    Heartache! It’s hard to game out economic scenarios, long term, isn’t it?

    *I’ve read the speech, and wanted to put up something related to the paragraphs of fantasy, but have been too busy to do so. Maybe later today…..

  2. Medicaid is claimed to be more efficient than private insurers.

    Medicare Myth – Low Administrative Cost

    () Medicare serves a population that is elderly and receives much more medical care, making administrative costs smaller as a percentage of total costs.

    () Private insurers have a number of “administrative costs” that Medicare does not have, like state taxes of 2-4% on health insurance premiums. These can’t be reduced by better administration.

    () On a per-person basis between 2001-2005, Medicare’s administrative costs were 24.8% higher than private insurers.

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