Mandated Change

“The way most goods and services become excellent — I mean really excellent — is through competition…How do you think we got from subsistence agriculture to super-cheap food? By mandates?”–Tyler Cowen

In November, the United States may take its strongest lurch to the left since 1933. The Republicans easily could lose 10 seats in the Senate.

The ramifications of this on the free market will be stultifying. The Democrats will not be able to raise taxes to produce more income; the AMT stands in the way of that. All tax increases on the richest 2% will go to covering the losses on the AMT.

They start with a deficit THEY say they can clean up. That means no new spending programs. Compounding their problem is Social Security, which they postulated was in great condition. When those increased obligations start cutting into their other favorite programs, the only choices are spending cuts or add regulations. You‘re aware which way that goes. Unless they chose Pigovian taxes, which must not be called taxes, call them encouragement for the masses.

A type of a Pigovian tax is a “sin tax”, which is a special tax on tobacco products and alcohol.
Such taxes have historically triggered rampant smuggling and flourishing black markets, especially if they create large differences in the price of popular products in neighboring jurisdictions. Critics of sin taxes argue they are regressive in nature and discriminate against the lower classes, since in many jurisdictions they are more likely to be consumers of alcohol and tobacco, more likely to consume a greater quantity of it, and thus are taxed a much greater proportion of their lower income.

Prepare for “instructions” on what light bulbs you may buy; how much health insurance to purchase and from which non-competitive companies with prix fixe premiums. Here is the auto fuel you will like at a price selected by the government.

[snip]
The business sector is going to be increasingly told what to sell and how to sell it. Particularly in health care and energy, firms are going to be accountable to bureaucrats, not to customers. Products and services will be designed in Washington, not by competition.
Regulations and mandates are an alternative to budgetary spending. For example, if politicians do not want to spend money on recruiting a volunteer army, they can institute a draft. Similarly if politicians do not have the resources on budget to pay for universal health insurance, they can pass a law making the purchase of health insurance mandatory. If such a law is effective, then the uninsured will be “drafted” into the army of the insured.

The Massachusetts Model

Consider the Massachusetts health insurance plan. Under the plan, individuals are required by law to purchase health insurance. The type of health insurance that they must by is defined by government regulations. As reported by the Massachusetts Medical Society,

“On March 8, the Commonwealth Connector Board approved seven insurance products for the Commonwealth Choice program, designed to cover uninsured residents who do not qualify for the Connector’s subsidized plans or Commonwealth Care. Below are links to spreadsheets containing the details about premiums, co-pays, and deductibles.”

If you live in Massachusetts and meet the eligibility parameters, you must purchase one of these seven policies. It is illegal for a health insurance company to compete for your business by offering a different policy, such as a policy with a higher deductible or a policy that excludes coverage for some medical procedures.

Private insurance companies still are allowed to conduct business and earn profits in Massachusetts. They are just not allowed to innovate or compete in terms of product offerings.

Regulatory Cost Control

Health care is going to be a tar-baby for government. The more that government grabs, the more it is going to find itself stuck with problems.[snip]

Energy Regulation

Businesses that affect the consumption of energy will also be managed by regulators. We can expect utility de-regulation to be halted and reversed. Alternative fuel mandates and emission controls will be gleefully enacted. [snip]

Labor Regulation

Another objective of the Left is to reduce income inequality. [snip]
…, we can expect to see a raft of new requirements placed on businesses requiring them to offer employees subsidized day care, longer vacations, higher minimum wages, and so forth. [snip]

Read about Germany’s unemployment debacle and the EU situation in general.

Backlash?

Many Americans will welcome the regulatory state. Many others will accomodate it. Only a minority of us will oppose it. Somewhere down the road, as people see the indignity of the many intrusions and the adversity of the consequences, I hope that there will be a backlash. Otherwise, if the era of mandates emerges as I fear it will, then the engine of capitalism in America may run out of the fuel of competition.

All these solutions when applied worked so well. See: Sweden, Soviet Union, Germany, France, Denmark et alia for such successful models.

Archived in: Deficit, Democrats, Health Care, Republicans, Social Security, Taxation, Taxes