Former Labor Secretary Robert Reich penned an op-ed to the Huffington Post rebuking David Fahrenthold’s criticism of Bernie Sanders. In typical fashion, Reich’s doublespeak dismisses reality for what is clearly a defense of the political agenda outlined by Fahrenthold. His arguments, which are seemingly random at times, uphold government institutions as immune to the political influences we’ve seen in the modern era.
He asserts that “the biggest threats to academic freedom these days aren’t coming from government.” Guess who is at fault? Billionaires, of course.
This, however, ignores the on-going government failure in the public school education system – as if government managed college would end any better. “Academic freedom” is already limited in this country at the K-12 level. Public school mandates severely restrict school choice and trap bright young minds into failing institutions. The market didn’t cause that problem; it is strictly a failure of government. Yet Reich believes that failure will not spread to the college level.
In fact, increased government involvement has already been harmful to college education. Reich seems to think young people can’t “afford college tuition because of slashed state budgets.” His attempt to make a case for federal involvement ignores empirical research on the matter indicating that it has already failed.
According to the New York Federal Reserve, “institutions more exposed to changes in the subsidized federal loan program increased their tuition disproportionately around these policy changes, with a sizable pass-through effect on tuition of about 65 percent.”
The government admits that government programs make college unaffordable, yet the grandiose solution is to expand government programs to make it more “affordable.” So no, Koch donations, or whatever other excuse, does not make college unaffordable. It is actually the $460 billion in student loans held by the federal government that does this. I wonder if Reich thinks anything of George Soros’s donations of $26 million to various schools. Probably not.
While there are certainly cases of students with enormous amounts of debt, it doesn’t necessarily mean that is the only option for achieving a college education. You can attend a four year public school in-state for $9,139 per year. Affordable institutions already exist, and services like Code School continue to thrive on less than that.
If his defense of “free college” was bad, his case for single payer health insurance is even worse. Again, he believes that this would not be synonymous with “government control” because the government already finances health care through government subsidies. The fact that government already does something does not mean they do it well or that no one else can possibly do it.
He says “why should anyone suppose these for-profit corporate giants will be less ‘controlling’ than government?” In a competitive market, firms must innovate new solutions to fulfill customer needs. A market under total directive of the federal leviathan is a monopoly by definition and no such competitive structure exists; thus you are stuck with one provider.
Under our current system, competition has declined with increasing government involvement – such as health insurance companies not being allowed to compete across state lines. Already existing intervention has restricted consumer choice by increasing switching costs. Competitive markets are not controlling, on the other hand, because consumers are free to pursue their own desires.
Reich continues the assertion that single payer, with its $15 trillion price tag, would be a net benefit for the whole of Americans. His evidence of this? For-profit health insurers spend large sums on advertising, marketing, executive pay, and billing. It is for these reasons Reich believes a single payer would be cheaper.
For one, it is laudable to think that costs vanquish simply because something is made a public good. Government would most certainly incur costs for billing and “executive pay” – as if head bureaucrats and invoicing are cost-free. The IRS, for example, spends $0.41 to collect $100; not to mention the $6.1 billion in compliance costs. If something is funded publicly, there are obviously billing costs. Any enterprise, whether private or public, will have administrative costs. To assert that as a net gain for tax payers is beyond rational speculation.
Just as billing costs wouldn’t vanquish, executive pay is not a cost driver for insurance companies. Aetna, for example, paid their CEO $15 million – an insignificant amount relative to their $58 billion revenue. Executive pay is not a significant line item in their costs, nor does it have a profound effect on prices. In fact, executive compensation is mostly stock options that increases only with the market value of the corporation.
Considering government waste in every corner, including $36 billion in fraudulent Medicare claims, it’s hard to believe that government can run an operation more cost effective than a private enterprise.
Reich echoes the leftist belief that a small group of people are capable of allocating resources to meet demand better than the market. His view of the market, which I have addressed in the past, is based on the condition that government can create jobs and perpetuate growth. In reality, he does make a choice between market or government.
In his choice, however, there is no understanding for the basic function of a market; which is the means to allocate scarce resources to meet relatively unlimited demand through a functioning price structure. All of his examples of supposed market failures are examples of market instability alongside increased government intervention, and his solutions will likely cause more instability.