Thursday, April 7, 2011


Matt Yglesias writes:
What I never understand about this is that all “rationing” is self-rationing. If we have a single-payer system that’s only willing to pay for certain services, then citizens are still free to pay out of pocket for other things. The fact that Medicare won’t pay for a MacBook Air doesn’t mean that grandpa can’t buy a MacBook Air, it just means he has to spend his own money on it if he wants one.

This type of argument always bugs FLG.

If a decision is made to increase taxes, it necessarily means that the government will decide what to do with the money. The citizens affected by this tax increase then have to decide how to adjust their spending, which FLG guesses you could call self-ration. But if a citizen's after-tax income goes down, and then they can no longer afford to buy any number of goods or services, then that's not self-rationing except in the most myopic of analytical modes.

So, imagine this admittedly hypothetical situation:
Single-payer goes into effect. A middle-class person who was previous covered by private health insurance through their employer for say $5000 a year now has to pay $6000 a year in taxes instead. So, they are $1,000 worse off per year. Now, let's say that they want some sort of medical procedure or medicine that costs $500, but the government single-payer plan won't cover it and they can't afford it. But it's entirely possible that they could have under the previous, private plan.

Would you say that this is self-rationing? FLG doesn't think so.

To offer an even more stylized example, if you live in FLG-Ville where FLG is king and he passes a law that increases your taxes to everything but $1 of your income, but then offers to provide you bread and water, a yurt, medical care, etc for free, would you agree that when you can't buy a thick, juicy steak or an iPod that you are merely self-rationing. Come on, you can buy them with your after-tax income.

Look, FLG understands that there are a bunch of assumptions in the middle class health care scenario and he is grossly exaggerating the second one, but he hopes that it illustrates the fallacy of Matt's argument.

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