Liberty Defined: 50 Essential Issues That Affect Our Freedom (24 page)

Too often doctors and hospitals are successfully sued for injuries when no one with certainty knows who is to blame. Conservatives react by hastily endorsing national tort reform with restrictions on awards. Constitutionally, this is the wrong approach. Morally, injured patients deserve compensation. Only a free market approach can solve this dilemma.

Legalizing contracts could go a long way to solving this problem. Today, an agreement between patients and doctors on limiting liability and establishing third-party arbitration does not hold up in court. Antitrust laws prohibit doctors from working together to devise contracts for a no-fault type of insurance that would exclude the trial lawyers from ripping off the system.

Unfair arbitration and settlements would prompt patients
to look for only those who offer fair settlements. When we buy a car, most purchasers know exactly what the warranty promises and how long it lasts and how much an extended warranty costs. With no lawyer fees, cases would be settled quickly and patients would receive benefits. Criminal acts obviously would not be protected, only bad outcomes.

In obstetrics, the doctor is blamed for all bad outcomes regardless of fault and held responsible for any problem developing for twenty-one years. A policy for nine months and delivery paid for by doctor and patient to compensate for any bad outcome is a policy that could probably evolve. Trial lawyers would be hysterical if this free market solution ever became legal.

Tax credits should be offered for all medical care costs, including insurance for care as well as for problems of shared liability. What if every fender-bender car accident required a trial to determine the degree of injury and benefits and faults? Car insurance companies work out the details rather quickly without trial lawyers receiving the greatest benefit.

There must be more competition for individuals entering into the medical field. Licensing strictly limits the number of individuals who can provide patient care. Many of these problems trace to the Flexner Report of 1910, which was financed by the Carnegie Foundation and strongly supported by the AMA. Many medical schools were closed and the number of doctors was drastically reduced. The motivation was to close down medical schools that catered to women, minorities, and especially homeopathy. We continue to suffer from these changes, which were designed to protect physicians’ income and promote allopathic medicine over the more natural cures and prevention of homeopathic medicine.

The point is not to endorse one or another theory of medicine. The point is that we need consumer choice and the process of market-based improvements to take over. To this end, we need to remove any obstacles for people seeking holistic and nutritional alternatives to current medical care. We must remove the threat of further regulations pushed by the drug companies now working worldwide to limit these alternatives. True competition in the delivery of medical care is what is needed, not more government meddling.

Obama has been accused of pushing for socialized medicine. This is not exactly true. Maybe in time it will become a total government program. But actually his reforms are very similar to reforms pushed by the Republicans over the decades. The Republican Party under Eisenhower established the Department of Health, Education, and Welfare in the 1950s. Nixon pushed through managed care ERISA laws in the early 1970s after a decade of Democrats implementing their Medicare and Medicaid programs with strong Republican support. The Reagan administration expanded medical transfer payments. Prescription drug programs were passed by the George Bush administration and a Republican Congress.

And now it’s the Democrats’ turn once again. Republicans shout “socialized medicine” as they become the nominal opponents of Obama Care.

A better description of what has helped over the past forty to fifty years is the takeover of medical care by the corporations. We now have a form of corporatism veering toward fascism. We all know about the military-industrial complex; few understand the danger of the medical-industrial complex. Though we hear rhetoric condemning the drug and insurance
companies, you can be sure that no changes will be made in the system without the prior approval of the biggest players in the industry. Regardless of party, corporate special interests are protected. This involves medical management companies, hospitals, organized medicine like the AMA, drug companies, and insurance companies. It is these corporate entities that must come to Washington, spending millions on lobbying efforts to protect their financial interests; concern for the patient is a smokescreen.

Corporations, unions, and governments stand between the patients and their doctors regardless of motivation. The quality and cost of medical care can never be improved by forcing on the American people greater debt-financed involvement in medical care. Medicare and Medicaid are already bankrupt. Creating a new trillion-dollar system will only hasten the day of reckoning.

I
have written in great detail about the shortcomings and grave danger of an unchecked central bank—the Federal Reserve—but the argument needs to be repeated in every discussion of public policy.
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All talk about the dangers of big government and loss of liberty is inadequate if the negative impact of the money managers is not addressed. Avoiding the subject, deliberately or not, serves the interest of those who support expanding government welfare and promotes an indirect way to pay for unpopular and unjust wars.

The problem is easily summarized. Money was once rooted in a scarce commodity like gold or silver. It could not be manufactured by governments. In the late eighteenth and in the nineteenth centuries, there were many debates about the first and second Bank of the United States. In 1913, Congress created the Federal Reserve with the power to print new money.
This allowed government to pay for wars and welfare, but it also generated economic instability with booms and busts. Each time we’ve gone through this, the government and the Fed removed more of money’s commodity backing. Since 1971, the dollar is not redeemable in anything but itself. It is nothing but a symbol, and there are no limits on the number of dollars government and the Fed can create. The result has been an unchecked expansion of the state and a brutal and long inflation that has reduced our living standards in deceptive ways.

Until just a few years ago, the number of Americans who understood the dangers of this policy of monetary destruction was quite small. Most Americans, because of what they had been taught for decades, believe the Federal Reserve provides the ultimate safety net for everyone concerned: bankers, Wall Street, investors, businesses, employees, consumers, et al. Most believe that the Fed gets us out of jams such as too much inflation, recessions, or too high interest rates.

Alan Greenspan was called the Maestro and was heralded as the genius who had a magic touch and could fine-tune the economy in a new economic era. The fact that the Fed was set up to be the lender of last resort, along with easy credit granted by the Fed, encouraged huge malinvestment and excessive debt. The gargantuan size of the derivatives market—a crisis not yet resolved—could not have occurred without a Federal Reserve and the moral hazard its policies generate. The Fed should have been blamed for most of our economic problems rather than credited with providing solutions to them.

Legislation and regulations added fuel to the fires of speculative excesses, especially in home mortgage derivatives.
Keynesians encouraged everyone to trust the safety net of government spending and Federal Reserve easy credit. This misplaced trust, based on false assumptions, has generated, in my estimation, the largest financial bubble in all of history.

The Fed has, in the past, been able to take credit for the good times and for pulling us out of the bad times. But no longer will it remain exempt from blame. The monetary system guarantees that investors and banks will push the envelope and make careless speculative decisions that generate a bubble economy waiting to burst.

I’m sure the historians one day will express great amazement as to some of the silly notions that were accepted as being sound for so many years, before the current collapse occurred. What sane person would advise a family member or a friend who was in over his head financially, in debt, and about to lose his home that the solution was to borrow more money and spend it and sign up for as many new credit cards as possible? It is ludicrous. In addition, he is told that it is not necessary to work overtime or take a second job to reduce his debt.

And yet that’s exactly what our nation has been doing—in spades—since the crisis hit in 2008. And the Keynesians are still surprised and annoyed that the economy has not recovered. Their answer continues to be spend more, borrow more, and increase the debt even faster. It’s hard to believe that reasonable people believe this. An individual is not better off by assuming more debt and spending more, so how can a nation expect to be?

Keynesians have lost the intellectual debate. After the total failure of the most militant forms of economic planning—fascism and communism—the worldwide failure of Keynesian-type
central economic planning is staring us in the face. They have but one card left to play: the argument that anyone who doesn’t go along with their bailout programs, which are nothing more than rehashes of the programs that created the crisis, doesn’t care about people and is devoid of all compassion. Instead of debating the underlying economic policies, they resort to demagoguing the issue with innuendoes and false charges regarding compassion.

Keynesians and their political cronies in Washington are quick to accuse anyone who opposes unlimited unemployment benefits as heartless. The question they won’t even consider is what would they do if it were shown that extracting funds from the productive economy to subsidize unemployment results in prolonging the unemployment and actually increases the number of jobs lost? As funds are drained away from those who are barely hanging on and trying to expand their businesses, the economy is made weaker.

Those who refuse to engage in the intellectual debate and look at the consequences of ideas and policies resort to politicizing the issue with offers of transfer programs based on increased taxation and inflation in order to maintain power. If a reversal of this process is not achieved, total bankruptcy will force us to consider an entirely new system.

I would like to see a dollar as good as gold. I would like to see the banking system operating as it would under free enterprise, meaning no central bank. I would like to see competitive currencies emerge on the market and be permitted to thrive. I’ve been pushing for these solutions for decades. The problem of the transition is not technical. It can happen. The problem is political. Paper money is a drug and Washington is
addicted. What, then, is a realistic solution? As Hayek used to say, we need choice in currency. Washington should get out of the way and let another system built on human choice emerge spontaneously. That would require an end to the crackdown on competitive currencies. I’m fully confident that we would see the dollar outcompeted in time.

Hayek, F. A. 2009.
Choice in Currency: A Way to Stop Inflation
. Auburn, AL: Mises Institute.

Paul, Ron. [1982] 2008.
The Case for Gold
. Auburn, AL: Mises Institute.

Rothbard, Murray. [1963] 2008.
What Has Government Done to Our Money?
Auburn, AL: Mises Institute.

T
he expression “moral hazard” is frequently used today to describe economic decisions that have been influenced by government programs. It’s generally recognized that with a government policy that insulates against risk, individuals might react differently than they otherwise would have. These changes in behavior are sometimes subconscious and seem natural, yet the consequence turns out to be hazardous to all parties involved.

Our society and economic system is now engulfed with moral hazard and its many serious unintended economic consequences. The term “moral hazard” originated in the sixteenth century. It was initially used to describe behavioral changes as a consequence of owning insurance. English insurance companies, in the late nineteenth century, became especially aware of this phenomenon.

They came to understand that individuals who had property insurance were more inclined to engage in risky behavior knowing that compensation was guaranteed if the property
was lost or damaged by fire, carelessness, or theft. It was recognized that insurance may well be, under certain circumstances, an incentive for arson and other forms of fraud meant to cheat the insurance companies. This early use of the term was associated with explicitly immoral behavior.