Stop Me Before I Vote Again

My darling imp, Harvard Yard's own Greg Mankiw, recently weighed in on the pending pub-op plan. Here's Greg, lasering to the nub right up top:

"Most discussions of the issue leave out the answer to the key question: Would the public plan have access to taxpayer funds unavailable to private plans? If the answer is yes, then the public plan would not offer honest competition to private plans."

Now I know that not a soul reading this gets swayed by such a caveat. We pwogs of the saber-toothed variety couldn't give a Dutch fuck if "taxpayer subsidies would tilt the playing field in favor of the public plan," because for us heroic crypto-socializers the pub-plan-op is at best "a disingenuous route toward a single-payer system."

I think Greg is wrong even on his own terms, and I think he knows it. The imp hasn't counted all his potential tilts. Some are costless and sufficient.

But let me back up first. Let's look at a GSE like Fanny and Freddie. Are those taxpayer funds at work? Well, not so anyone regular should care. Yes, Uncle's implicit guarantee reduces their borrowing costs; but hey, that doesn't come out of the hides of taxpayers like you and me, does it?

Maybe Greg intentionally leaves something out here -- I doubt he misses much of anything in these waters -- but he's clever, he has an escape hatch in his use of the fuzzy phrase "taxpayers' funds". And if one takes the bait -- and surely we're meant to (note the slip into the use of the word 'subsidy') -- then we assume Greg means some sort of overt taxpayer cost, which indeed raises hackles.

You could so twist these words around to make a pub-plan option "standing on its own financially" look like "a private nonprofit plan," but "in essence" it would hardly be so.

Any civic "foundation" has to pre-build an adequate endowment before launching itself. On the other hand, an uncle-backed outfit simply issues bonds that in the event won't require any out of pocket taxpayer subsidy.

Uncle's guys could quickly be up and running and over the initial hump to the point where they're servicing their fixed costs and starting to retire their sunk costs out of operating margins like any viable privateering corporation does.

No operating subsidy needed, especially if the new outfit is just an add-on to medicare with its already existing facilities and staff.

Obviously if the criterion is Greg's "fundamental viability of the enterprise", then any startup hump is irrelevant, right?

Greg tries closing his argument with this: "But then what's the point [of a public plan option]? ...If advocates of a public plan want to start a nonprofit company offering health insurance on better terms than existing insurance companies, nothing is stopping them from doing so right now."

See, Greg wants us to conclude the reason these non-profit options don't already exist is because there aren't any worthwhile savings there to capture. Indeed the non-profit, with its eunuch's driveless nonprofit constitution will prolly higher-cost themselves out of existence.

T'ain't so, and Greg knows it, or he wouldn't be blowin' his casuist's sax like this.

Yes, a pub-plan option could be a competitor to be feared, Greg -- but not because it might have availible to it some taxpayer subsidy. Yes, Greg, you're right: unlike sleeping under bridges, "There is free entry into the market for health insurance."

But no, it does not follow that if a public plan without a taxpayer subsidy "would succeed, so would a nonprofit insurance company."

The real reason there are no viable non-profits today is simpler: what if a nonprofit on the scale necessary to capture these known economies is, as a practical matter, unconstructible by civic action alone?

If so, then Greg's "bottom line... honest competition in the provision of health insurance" does not lead to his conclusion that "a public option cannot do much good," since if it could some private goo-goo outfit would already be doing it.

Nope, Greg, you can't exorcise the spectre with that facile florish. Stay tuned, and see what, if anything, can fell PPO.

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PS: Greg gives his overanxious tilt away right at the end by adding this bit, quite gratuitously and without further support: a public option "can potentially do much harm."

Well yes it can -- to the private profiteering insurance ghouls; but not to the pocketbooks of us little schmucked-up tax- and premium-payers.