The big debate these days is whether the federal government should be in the business of providing health insurance. Ultimately that’s what the debate is about.

Your answer to this question depends on whether you’re a Liberal or Conservative. Liberals say “yes”. Conservatives say “no”.

What’s funny (to me anyway) is that Conservatives often cite capitalist motives as the reason why the government should stay out of the health insurance business. They say that certain care will be denied because it will cost too much. (They fail to mention that private insurance companies already do this.)

But that’s what capitalist motive is, right? Cut costs to increase profit?

The other fear tactic is that the government will have to raise taxes considerably to pay for this. But that’s a capitalist motive too. Raise prices to increase profit.

The real problem for Conservatives is that they believe that any government program that shows any caring for citizens is evil. To that end they will do anything they can to prevent any social program from coming into existence. Furthermore, they will do anything they can to cut funding for existing social programs to help ensure their demise while simultaneously claiming “see, the government can’t run this properly!”

Lakoff has what appears to be an explanation for this mindset. Conservatives have a strict father model of government. Liberals have a nuturant parent model. Rather than explain those models here, please see the linked Wikipedia articles instead.

People on both sides want to live as independently as possible. It is my belief, however, that Liberals understand that society has grown to the point where we are all interdependent. Conservatives have not yet acknowledged this.

As interdependents it is our duty to support each other when necessary. Conservatives do support each other through contributions to church or charity. But since they choose the church or charity they choose specifically who they support which generally means supporting their own kind.

Liberals believe in supporting people even if they don’t necessarily agree with them.

A Liberal would gladly pay additional taxes to help provide government run health care that took care of a Conservative. The reverse is generally not true. But a Conservative would gladly contribute to a charity that helped provide health care to someone in their own community who needed that help.

I believe that slowly but surely more and more people are moving towards the Liberal view of how things should work. This scares Conservatives who are becoming the dying breed. But obsolescence is a part of capitalism to which Conservatives put all their faith in. They should be happy to see it working even if it inevitably means their demise.

My opinion (and that of my friends) is that private prisons do not make sense overall. There are, of course, pros and cons to this argument. Here are the various points that I could find:

Pro Arguments

Profit motive encourages prisons to be run more efficiently. Prisons get a speific amount of money from the government to work with and have to make sure that their facility is safe and performing to government standards. They would also be safer as there are penalties for escapes. The prisoners themselves would be better treated (not quite sure how this works) and would also be healthier (also not quite sure how this works).

Against Arguments

Profit motive encourages longer sentences as prisons are generally paid per-prisoner-day i.e. they get an allowance for each prisoner they have in custody on each day. This incentive discourages rehabilitation as it’s more profitable to keep someone in custody longer so that more money can be gotten from the government (that is the tax payers which are you and me). Why send someone to drug rehab for 90 days when you can incarcerate them for 5 years instead and make a shitload more money off of them.

I found this study which is a reasonable starting point. It doesn’t claim a particular point of view. It only presents what others have learned.

Personally I think the whole prisons-for-profit idea stinks. Here’s my reasoning:

1. Prisons are expensive. It makes sense not to spend taxpayer money on them unless absolutely necessary.

2. Prisons-for-profit have a motive to increase the population of prisoners because each prisoner in custody represents a certain amount of profit each day. The more prisoners in custody the more profit they receive.

3. Point #3 directly conflicts with point #2 which is to keep total costs down. The fewer prisoners in custody the less it costs taxpayers.

4. Rehabilitation programs cost less than prison and are generally more effective. Yes, there are some people who can’t be rehabilitated and will need to be held in prison instead. But does it make sense to lock up a marajuana user who has never committed a crime other than smoking pot? Wouldn’t it make more sense to spend money on rehab instead? (as a side note: I personally believe that marajuana should be legalized, but that’s a different subject and I won’t go into it here)

The U.S. has more people in prison both per capita and overall (yes, even more than China which has about 4 times the population of the U.S.) than any country in the world. Why is this?

I believe it’s because we’ve put out our prisons for profit. If there’s money to be made doing something you can be certain that the people making money from it will be motivated to increase market share. That’s capitalism. So if there’s money to be made locking people up, why wouldn’t those people making money at it be encouraged to have more people locked up?

I ask any free market person out there to explain why prisons-for-profit is good for society and also why the corporations running the prisons would not be encouraging stricter laws and longer prison sentences in order to increase their business.

I know my credit score – it’s 804. And I know the source of the inquiry – I refinanced my mortgage. So here I am with an excellent credit score and doing my best to improve my financial situation and my auto insurance company penalizes me for it.

Now I suppose it’s entirely possible that their actuarial department has come up with some statistical measurement that says if someone has looked at their credit report in the last 12 months then they’re at a higher risk for an accident. But to increase my rates by 7% because I’m trying to fiscally responsible is ridiculous!

Economies are balanced when supply (production) = demand (consumption). If demand goes up but supply doesn’t, then you get inflation (rising prices). If supply (productivity) goes up but demand doesn’t, you see deflation (falling prices).

But what has been happening for the last 25+ years is that productivity has gone up, but real wages (demand) has not. When that happens, the way the economy grows is by creating debt. Debt temporarily increases demand. So we’ve been under the illusion of a growing economy, but as we’ve seen it’s starting to unravel in a nasty way. That’s because eventually you have to pay the debt back.

While the debt is being paid back then demand really drops, you end up with oversupply, and prices start to fall. When prices fall, people wait to spend their money because it will be worth more tomorrow than it is today. That, of course, exacerbates the deflation problem. It’s what happened in 1929.

In a way, the Suzie Ormann’s of the world are right. Getting out of debt is the answer. It will hurt for the short run but once the economy stablizes it will help a lot for the long run.

In my younger days I had very strong opinions about how I thought the world should be run. Of course those opinions varied depending on the mood I was in. I contemplated national ID cards (this was in like 1982) and being able to track the movement of everyone to what a Randian society would actually look like. As I’ve gotten older I’ve tempered my views somewhat and tried to make them more consistent with each other. (Monitoring every citizen doesn’t work well with a Galt’s Gulch economy).

Yet I still find myself a bit torn. Some of that is not understanding all the details. So I read and learn. Today I read The Conservative Nanny State which discusses how the wealthiest in this country use government to keep money flowing upward. I’m also reading The Forgotten Man: A New History of the Great Depression. One point in this book is that the protective tarrifs were what caused the depression in the first place, and both Hoover’s and FDR’s refusal to remove them prolonged and deepend the depression.

The one argument in The Conservative Nanny State that I found interesting is that most (if not all) free-market proponents both complain about the inefficiency of government AND claim that it’s unfair for government to compete with private business. It would seem that free-market theory would have inefficient businesses – even if run by the government – at a disadvantage. If the government really sucked that bad at running a business then why would private business be so afraid of government run business? Could it be that government run businesses aren’t as inefficient as we’ve been led to believe?

Take this example from page 14 of The Conservative Nanny State:

Back in the late 1990s, several express mail companies actually went into court to try to force the U.S. Postal Service to abandon an ad campaign that was proving very effective. The Postal Service ads pointed that its express mail service was much cheaper than FedEx or UPS. After the courts refused to outlaw the ad campaign, the express mail companies went to their friends in Congress, who effectively tamed the competition.

The U.S. Postal Service is not funded by any tax dollars. It is completely self-funded. Yet it was prohibited from promoting its services because private enterprise couldn’t compete? Where exactly is the logic in that.

Lest you think that The Conservative Nanny State is a “let the government run everything” book, there are arguments about getting the government out of the way on the issue of debt. From page 59:

In a free market economy, businesses know that investment decisions don’t always work out as expected. Sometimes businesses invest in developing a product that turns out not to be as good as they believed, or that doesn’t have the market they anticipated. They may invest based on trends, such as rising oil prices, that do not continue, leaving them with large losses. Or, they may extend credit to people, businesses, or countries that turn out to be bad credit risks. No one expects that the government will step in and sustain the demand for a bad product. Nor do we expect the government to intervene to make sure investors’ expectations about rising oil prices are realized, for example, by buying up massive amounts of petroleum. But when it comes to making bad credit decisions, the nanny state conservatives do expect the government to step in and bail them out.

In a truly free-market there would be no government intervention. Companies making bad loans would be S.O.L. if the people those loans were made to couldn’t pay them back. It could be claimed that the current financial crisis we’re in stemmed in part from changes to the bankruptcy laws back in 2005. Lenders were more likely to lend money because they knew that they could benefit from the fact that it was harder for people to say “I’m broke, I can’t pay my debt, I’m filing for bankruptcy protection”.

What the new laws did was effectively put ALL the responsibility for the loan on the part of the borrower. It indemnified the lender who could shirk his duties in making sure the loan would be repaid. Higher risk loans deserve higher interest rates. You see that on corporate and municipal bonds and bond ratings. Credit scores serve a similar purpose for personal lending. So why would someone with a credit rating of 600 deserve the same low interest rate that someone with a score of 800 might get? They shouldn’t. The score of 600 is a higher risk and deserves a higher interest rate.

In exchange for the higher interest rate, the lender is also taking a risk that the loan won’t be repaid. That’s factored into the higher rate. But when the bankruptcy laws changed lenders realized that their risk was lowered. Someone with a 600 score now had the same risk as someone with an 800 score. Why? Because the government was turned into a debt collection agency.

You can read the entire book online for free (yes, free – there’s even a section on why copyrights and patents are a form of protectionism that are a drag on the economy).

After reading it I feel better about my weird combination of free-market and socialistic views and I hope someday soon to be able to articulate them better.