Independence Daze and the Failure of the Constitution

Independence Day celebrates the signing of the Declaration of Independence, of course. Many people refer to this national holiday as “the Fourth of July”, a sad substitution in my view. To them it’s a day off at the pool or beach, with barbeques and fireworks.

(Incidentally, what we call the Declaration of Independence actually does not bear that title. The heading reads: “The unanimous Declaration of the thirteen united States of America.”  The word “independence” appears nowhere in the document.)

Perhaps people use “Fourth of July” instead of “Independence Day” because of the hazy narrative surrounding the formation of America, dimly recalled from their public school education:

On the Fourth of July, 1776, citizen farmers, smiths, storekeepers and tradesmen—relatives, neighbors, and friends—took up arms in large numbers. Against enormous odds, the fledgling American nation rose up, slowly but surely beating back the British in stirring battles at Lexington, Concord, Bunker Hill, Saratoga, and Yorktown. At some point, General George Washington crossed the Delaware River with his Continental army, defeated the British, and won the war. Before returning to their farms and shops, the victorious militiamen paused to develop the Constitution, which laid out the most perfect form of government ever conceived.

The facts vary from this simplistic account.

Colonial aggression towards the British began long before the Declaration of Independence. It included demonstrations, sabotage, sneak attacks, and countless acts of passive resistance. But very few colonists were involved. Most kept their heads down, openly sympathizing with the Crown or at least acquiescing to its demands. Colonists who actually fought Redcoats in the field never amounted to more than three percent of the population.

The war itself dragged on for more than eight years, from the “shot heard round the world” at Lexington in April 1775 to the British evacuation of New York in November 1783. Another three years passed before delegates from the States were sent to Annapolis in September 1786 to recommend improvements to the Articles of Confederation, the 1777 mutual defense pact binding the thirteen colonies. The Annapolis convention produced a request for yet another convention to study a broader set of issues, which resulted in the Philadelphia Convention of May-September 1787.

Although delegates to the Philadelphia Convention were instructed to improve the Articles of Confederation, some attendees rejected that task in favor of creating a new national government with broad powers over the individual States. We call behavior like this today "mission creep". James Madison and Alexander Hamilton, among others, favored a radical plan to produce a powerful national government. They persuaded other attendees of the Convention to go along. After months of political horse trading, during which multiple schemes were pushed, argued, and rejected, a final compromise emerged which became the original Constitution for the United States. It was sent to the States for their individual ratification.

When the new Constitution was revealed to the States and their citizens, many were astonished. What happened to fixing the Articles of Confederation? What is this new creation, a “federal” government? Those who opposed ratification became known as Anti-Federalists, among them Patrick Henry and Samuel Adams. They were concerned that a strong central government was a threat to individual rights, and that the President would become a king. The Federalists—Madison, Hamilton, and others—said this was impossible. They pointed to the new government’s careful separation of powers into independent branches, which would exert checks and balances against each other. The federal government would be strong enough to get certain things done, but only those things, and nothing more. The Federalists pleaded for ratification, saying, in effect, “This is the government we need. Surely you appreciate the elegance and beauty of what we've created!”

At first some did. Five states approved the new Constitution in short order. But the rest balked. The chief stumbling block was the complete absence of any mention of individual or State rights in the document. Federalist James Madison actually argued it was better NOT to include them—he claimed that once spelled out on paper, these rights would be unnecessarily limited.  He failed to persuade. It took the formulation of ten amendments listing the rights of individuals and the States—the Bill of Rights—before the Constitution could be ratified.

Cynics of today may wonder why they bothered. Given what has happened over the course of more than two centuries—the vast expansion of the federal government and its relentless encroachment on our liberties—what difference does it make what the Constitution says? They have a point. Still, without the Bill of Rights, can you imagine even having a discussion today about the rights to free speech, assembly, or religion? Can you imagine anyone other than the police or military allowed to keep or bear arms? Many assert that we are secretly monitored unconstitutionally by the government—this would be completely legal without the Bill of Rights.  And jury trials?  Without the Bill of Rights, would these exist?

In hindsight, adding the Bill of Rights was a pretty good catch by the Anti-Federalists, wasn’t it? Without their vigilance, it’s quite possible we would have no rights at all as individuals. What about their other concern—that the President would become a king? Is the President today, practically speaking, a king with king-like control over his subjects, the citizens of the US?

One must conclude that the President today is clearly a king to a significant degree. As evidence, consider the President directing the agencies of the executive branch, such as the Department of Energy or the Environmental Protection Agency, to expand the regulatory reach of the federal government. Consider too, the on-the-fly modifications to the Affordable Health Care Act—the executive branch unilaterally changing Congressional law. These actions affect the lives of people well beyond the mandates of Congress. Perhaps most chillingly, the IRS has been caught singling out individuals and groups for punitive treatment based on political views, although the evidence attaching these actions to the President is incomplete, and not being investigated at all by today’s press corps or the Department of Justice.

Time proved the Federalists wrong in many other ways. An important one involved the ingenuity of people interpreting the meaning of words, especially this innocent-reading clause in Article 8:

“The Congress shall have Power … To regulate Commerce … among the several States….”

In spite of this clear and simple wording, and irrespective of reasonable interpretations of the words “regulate” and “Commerce”, thousands of laws have been passed regulating goods and services which have never been bought or sold, or which have never crossed state lines. As Supreme Court Justice Clarence Thomas puts it, “If Congress can regulate [such goods] under the Commerce Clause, then it can regulate virtually anything – and the federal Government is no longer one of limited and enumerated powers.”

Net-net, the US Constitution as a model for a central government with strict limits to its scope and power has failed. That it would fail eventually was suspected very early on by the Anti-Federalists. That it failed in fact was spotted first, perhaps, by Lysander Spooner in his 1867 essays entitled No Treason, in which he said:

“Inasmuch as the Constitution was never signed, nor agreed to, by anybody, as a contract, and therefore never bound anybody, and is now binding upon nobody; ... [noone] can be expected to consent to, except as they may be forced to do so at the point of the bayonet, it is perhaps of no importance what its true legal meaning, as a contract, is. Nevertheless ... the Constitution is no such instrument as it has generally been assumed to be; but that by false interpretations, and naked usurpations, the government has been made in practice a very widely, and almost wholly, different thing from what the Constitution itself purports to authorize.... But whether the Constitution really be one thing, or another, this much is certain --- that it has either authorized such a government as we have had, or has been powerless to prevent it. In either case, it is unfit to exist.”

If the Constitution has failed, and the government built upon it so obviously failing all around us, what exactly are we to do next?

What is Freedom of Speech Really?

Why is freedom of speech such an important topic, especially now? Because, of course, it is under assault. There is a false premise that freedom of speech must be balanced against public safety and individual security which, unfortunately, most people seem to accept. Freedom of speech comes from a surprising source, and when you understand what that source is, the confusions and distortions of freedom of speech promoted by both well-meaning and evil people become very clear.

Examples of free speech restrictions:

• University of Iowa art professor installs a statue of a figure dressed in a robe and hood reminding the viewer of the KKK, the figure is covered with a collage of newspaper headlines and images of racial violence. Some students objected, saying there was "no room for divisive, insensitive, and intolerant displays.” The UI president agreed and apologized to students who felt “terrorized” by the artwork.
• Modesto Junior College stops a student from distributing copies of the Constitution on Constitution Day. You see, he did this in a place other than the college’s designated “free speech zone” a tiny concrete slab big enough for two people. (Um, America is a free speech zone.)
• Brandeis University declares a professor guilty of “racial harassment” for explaining the origin of the term “wetbacks” in class while criticizing its use.
• The University of Oklahoma expels two students who were members of an SAE fraternity for a racist rant made on a bus, which was captured on video.

Perhaps the most important thing about the freedom of speech, before getting into what it is and where it comes from is this: It means literally nothing, it is of no significance at all, to allow speech you agree with.  It is no sign of enlightenment to permit uncontroversial or agreeable speech. Similarly, it’s no sign of enlightenment for the state to allow speech that the state agrees with. What IS enlightened, what is meaningful is allowing speech that is disagreeable.  If the state does not permit speech that is disagreeable to it, what does that make the state? Tyrannical.

Another important point that most people should understand but I doubt they do, is that citizens of the United States do not have freedom of speech because the Constitution grants it. The US Constitution does contain an Amendment (the First) which is supposed to protect freedom of speech. The text of that Amendment reads:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

(By the way, note what the Constitution doesn’t say.  It doesn’t say that the people have the right to freedom of speech. It says Congress shall make no law abridging the freedom of speech. It doesn’t prevent state or local governments from doing that.)

Your freedom of speech comes from the fact that you were born with natural rights, which include the right to life, the right to liberty, and the right to acquire property through honest means. The Constitution or any random law for that matter, could state the exact opposite, that certain speech is unlawful, or that your speech must be approved in advance by the state—it wouldn’t matter at all, you would still have freedom of speech stemming from your natural rights.

Freedom of speech as a property right. Freedom of speech, however, isn’t a stand-alone right, in the sense that you can say anything you like simply because you have freedom of speech as a natural right. That’s not where freedom of speech comes from. Your right to free speech stems from your right to property.

Very few people see freedom of speech in this way. That’s why there is so much confusion and misunderstanding when it comes to speech that should and should not be allowed. For example, we take as given that you must not shout “Fire!” falsely in a crowded theater. No one disputes this restriction, though most people incorrectly believe this is a case of striking a balance between the right to free speech and public safety. That is, in order to gain an element of public safety—avoiding being trampled to death for no good reason—we are told that we need to accept a minor reduction to our freedom of speech. And the frequent calls for “hate speech” legislation—another reasonable-sounding limitation of speech in exchange for greater social harmony—are also about this non-existent “balance” of multiple, competing, “freedoms”. Here is a good example, from an editorial in the Harvard Crimson entitled “Why Harvard’s Hate Speech Policies are Necessary”:

“Our nation is obsessed with the concept of freedom. The majority of U.S. citizens seem to think of theirs as the freest of all countries, and any perceived attack on this freedom is seen as a sacrilegious desecration of the Constitution, America’s holy book. However, laws, including those in the Bill of Rights, exist for a reason—to protect citizens. The provision of freedom of speech serves, accordingly, to protect people from being punished for their ideas and beliefs. However, this freedom can backfire and end up punishing people not for their ideas but for their identities when hate speech comes into play. There must be a carefully thought-out balance between freedoms and restrictions of speech in order to create a society where citizens not only feel free to express themselves, but also are free from fear and violence.

….

“There are freedoms to do things, and there are freedoms from things. When our freedom to speak our mind impinges on someone’s freedom from fear, or on someone’s right to feel safe in their community, then that freedom should not stand unregulated in any group that wishes to create a safe and respectful society for its members. We cannot create a respectful learning environment at our university if students from marginalized groups feel that their administration condones acts of violence against them. University regulations against hate speech are entirely necessary for maintaining respect and dignity among the student body, and Harvard’s policies to this end are well thought-out and fair—and certainly not worthy of protest.”

The only way this sounds reasonable is if you accept the premise that people have the right to “freedom from fear” or have a right “to feel safe in their community”. This is the “balance” argument in practice. It’s an argument that the right to freedom of speech and the “right to safety” are on an equal footing. It’s true that someone who assaults you physically has no right to do so, and you are completely justified in defending your person. But speech is not physical assault. Trading free speech for feeling safe misunderstands the source of freedom of speech. But when freedom of speech is viewed as stemming from property rights, this confusion and misunderstanding go away. 

Freedom of speech on my property. Let me explain. On my own property, I can obviously (at least I hope this is obvious) say or write whatever I like. I am, of course, responsible for my speech—if I falsely accuse someone of a crime, or reprehensible behavior, he can seek redress in the courts. (A more consistent world would tell him to buzz off—I own my thoughts about you. If you think I’m wrong, say so. The remedy to disagreeable speech is more speech.) But in general, I’m free to say whatever I like on my property. If I’m standing on your property, I cannot. After all, in what meaningful way would it be your property if I can come onto it and say whatever I like? You rightfully control what happens on your property, just as you are held responsible for what happens there. Let’s return to the famous example of shouting “Fire!” falsely in a movie theater. This is not a matter of exchanging liberty for safety. It’s a matter of property rights. The owner of the theater forbids me and anyone else from disturbing the peace in his theater, and rightfully so, as the theater owner is obligated to his paying customers to provide a peaceful environment in which they can enjoy the movie. Isn’t this more sensible and clear than a nebulous and subjective exchange of liberty for safety? This is a distinction with a real difference.

(By the way, the Harvard U editorialist would have been on firmer ground had he argued that free speech restrictions on campus were Harvard’s right to enact as a property owner. But Harvard accepts money looted from taxpayers, so that dodge is tainted by the school’s participation in the theft of taxation.)

If I have a right to say whatever I like on my property, can I shout loudly enough for you to hear me from your property? Can I do so in the middle of the night? Can I amplify my voice with loudspeakers so that you can hear me from a distance? Or do you have a “right to quiet” that trumps my freedom of speech? Similarly, can I put up large billboards, bright neon signs, or even the giant TV scoreboards you see in a sports stadium, to communicate my speech loudly in a visual way?

No license to coerce. In analyzing this case it is important to understand that the right to property includes the right to enter into agreements, contracts and exchanges with other owners of property. It excludes theft, coercion, or fraud. Coercion, the use of force, comes into play here. Speech that you cannot avoid hearing from your property is a form of coercion. My loud speech is coercive because it violates your property rights. The same would be true of large billboards, bright signs or TV displays, taking into account the fact that the sense of sight is somewhat more selective than the sense of hearing—you can look the other way, but you can’t “hear the other way”.

I can’t just fling my loud speech into the sky and forget about it. Although I have freedom of speech on my property, I’m also responsible for the consequences of my speech. If my speech takes the form of a coercive auditory or visual assault, clearly disruptive due to volume, brightness or time of night, my speech is improperly disrupting your property rights.

If I want, I can start a newspaper, a TV station, a radio station, or an Internet site, or I can purchase print space or air time in existing forums owned by others. I could rent time in a local auditorium and give a speech. This way I can distribute my speech to anyone who cares to read, watch, or listen. Or I can print pamphlets and stand on my property, or yours with your consent, handing out copies of my speech to passers-by. It’s their choice to take a copy or decline. I should refrain from slipping a pamphlet under your car’s windshield wiper without your consent, just as I shouldn’t tape one to your home’s front door, or put one in your mailbox.  These items are not my property, so I shouldn’t tamper with them without the owner’s consent.

Money as speech. The debate about whether “money is speech” when it comes to donating to political campaigns is thrown into new, and clarifying light once free speech is understood properly as stemming from property rights. In an absolute sense, your money is your property, so you should be free to do whatever you wish with it. But rich people will buy political power, you say. (Or less rich people will pool their money and buy power as a group.) There are two solutions to this problem. One assumes the state existing as it does today, huge, sovereign, and having enormous power over the lives of the citizenry. The solution in this “leviathan state” environment is to allow open contributions coupled with full public disclosure of the contributing individuals or entities, how much they contributed, and to whom. Let voters decide how important “money in politics” is, and whether a candidate is being bought through specific contributions. The other solution is to drastically reduce the power of the state, or better yet, eliminate the state entirely. If gaining control of state power through financial influence results in little or no meaningful power, contributions would be minimal or disappear entirely.

Speech on Public Property. When freedom of speech is seen correctly as a right stemming from the right to property, the cloudiness surrounding freedom of speech immediately clarifies when committed on or using private property, by the owner or with the owner’s consent. But what about public property?

Freedom of speech on public property is a complex matter, because ownership of public property is problematic. In one sense, every citizen of the state owns the property, but shared ownership is a problem if two or more owners disagree about a particular speech or speaker. Although there is an obvious solution (no speech restrictions on public property), the state, which claims ownership of such property, and therefore jurisdiction over what happens there, usually insists on creating laws controlling public speech. And although some people think representative government is some kind of magic elixir that keeps governments from running amok and doing disagreeable things, no matter who creates laws limiting speech or how they do it, the results are generally disagreeable.

One problem with speech on public property is that the state creates laws that prohibit a person’s speech for improper reasons. In order to enforce its public speech laws, the state requires public speakers to obtain permits in advance. Suppose a person plans to air grievances against the state or its officials, or discuss the replacement or abolishment of the state. Officials of the state are likely to disagree with the content of this speech, and are therefore inclined to use their power to censor the speech, by altering its content, by forcing the time or place to be inconvenient or disagreeable, or by prohibiting it altogether. Fortunately in some jurisdictions the laws on public speech prevent state officials from censoring speech based on content. State officials are only allowed to intervene where the state has a compelling interest. For example, the state may have a compelling interest to prevent a street demonstration during rush hour traffic. But laws constraining state officials can only go so far. Officials often choose to ignore them, and some states fail to notice or choose to ignore their transgressions (as do many voters, unfortunately).

Another problem with speech on public property is that even a popularly-elected body of representatives may erect speech laws (or other laws) with which some, or even many, citizens disagree. However the representation is set up, if a given representative speaks for two or more citizens, he is misrepresenting at least one of them, unless they all agree exactly with each other on a given issue. Over the course of time, even if all agree on some issues, eventually an issue will surface where they do not. This lack of consent from all of the governed is obviously worsened with fewer representatives, and is worst of all in the case of a single ruler.

Given that the problems with state control of public speech on public property simply do not occur on private property, a citizen who wants to preserve freedom of speech should advocate that the amount of public property itself—property owned by the state—be minimized, or even eliminated. This would prevent the state from claiming and managing property to the detriment of many citizens.

What about people without property? An obvious objection to free speech being based on property rights is the case of a poor person, a person who owns little or no property. Take the case of a person with low income, renting an apartment owned by a landlord. Since the renter does not own the apartment, does that mean he has no right of free speech there? In fact he does not, but consider a competitive apartment renting environment in which some landlords offer free speech as part of the deal and others do not. Those that do not will be at a competitive disadvantage. The market will force them to either lower their rents, to the benefit of renters who attach no value to free speech, or to consent to free speech by renters.

To people who misunderstand freedom of speech, it sounds horrendous that a person’s free speech might be limited by a landlord. But in fact today, most landlords ALREADY DO limit renters’ free speech, through their rental agreements. These agreements often require the landlord’s approval before the renter can post notices or signs, and certain types of content is strictly prohibited.  Public speaking on apartment grounds is also usually prohibited without prior approval. A disgruntled renter cannot post in a public area, for example, signs saying the rent is too high, the building is drafty, or the landlord is slow to fix broken plumbing, etc., and he cannot make unauthorized loud announcements in common areas. Renters accept these restrictions voluntarily when signing their rental agreements. And although there may be a few landlords who may try to prohibit it, tenants are nearly everywhere free to express speech of any content within the confines of their own apartments, provided they do not disturb the peace of their neighbors—the same case as for the property owner.

In the case of a homeless man who lacks an apartment, at any given moment he is either occupying public property or someone else’s private property. When he is on private property he is either trespassing or is there with the owner’s consent. The owner may consent to his free speech, or may choose to constrain it. If on public property, the homeless man has the same opportunity as any other citizen to free speech, subject to restrictions imposed by the state, legitimate or not. 

Hate Speech. It has become popular in recent times for states to erect laws that criminalize “hate speech”.

In Canada, inciting hatred against "any section of the public distinguished by colour, race, religion, ethnic origin or sexual orientation" is a criminal offense with maximum prison terms of two to fourteen years. The law makes exceptions for cases of statements of truth, and subjects of public debate and religious doctrine.

France prohibits public and private communication which is defamatory or insulting, or which incites discrimination, hatred, or violence against a person or a group of persons on account of place of origin, ethnicity or lack thereof, nationality, race, specific religion, sex, sexual orientation, or handicap. The law also prohibits declarations that justify or deny crimes against humanity, for example, the Holocaust.

In the Netherlands, Dutch penal code states,

“He who publicly, orally, in writing or graphically, incites hatred against, discrimination of or violent action against person or belongings of people because of their race, their religion or their life philosophy, their gender, their heterosexual or homosexual orientation or their physical, psychological or mental disability, shall be punished by imprisonment of no more than a year or a monetary penalty of the third category.”

American universities are perhaps the leading edge when it comes to restricting freedom of speech in the name of eliminating hate speech. In fact, the Foundation for Individual Rights in Education believes that 59 percent of colleges and universities restrict free speech, and another 35 percent overregulate speech on campus. That leaves only six percent without free speech regulation or restriction. Many of these regulations have to do with “hate speech”.

Hate speech laws sound, to many, like a good idea, at least superficially. Upon hearing the description of an existing or proposed hate speech law, many people agree that the law describes something reprehensible, and they often support enacting (or continuing) the law to prevent the “hate speech” from occurring.

Hate speech laws do not actually prevent hate speech from occurring. But they do result in formal charges, prosecutions, and convictions, which help to fill the dockets of state courts. Some celebrated trials have occurred, most notably against Dutch MP Geert Wilders, who has spoken out against the Islamization of Europe as a tremendous, looming danger. (He was acquitted.)

Aside from the fact that they improperly restrict speech, one problem with hate speech laws is that they improperly provide individuals and groups with a legal means of extortion, simply by claiming to be offended by someone’s speech. The laws as written may not entitle the supposedly-offended party to financial compensation, but the goal is not to go to trial, it is to receive a payoff, quietly and out of court. This works best against a well-known individual or company with deep pockets, who should consider themselves targets of what amounts to ambulance chasing.

Another problem with hate speech laws is that they establish precedent for the state to criminalize speech based on its content. This is a dangerous tool for further suppression of speech, including speech against the state itself. Speech against the state is the MOST IMPORTANT of all speech, and must be protected at all costs. If the state can prosecute and imprison you for what you say about it, how is that anything other than tyranny?

Wrap up comments. In the end, as with all liberties, you get to keep the liberties that you are prepared to fight for. Unfortunately, few people are prepared to fight for any of their liberties today, including the right to free speech.

Happy April 15th, Tax Slaves!

Just like you, I love, love, love paying my taxes. Especially income taxes. Nothing fills me with civic pride quite like paying my income taxes. Sales taxes are ok, and property taxes are fine too, but nothing puts that extra pep in my step like income taxes. I’m sure you feel the same.

April is absolutely my favorite time of the year. That’s when it all comes together for me. I get to see the income taxes I’ve paid, what extra I might owe, or whether I get some of it back. I try to arrange to get a healthy chunk back, so the missus and I can have a nice night on the town. A juicy steak and a bottle of wine, courtesy of Uncle Sam—now that’s a government program I can get behind!

Of course, I doubt I’d be so enthusiastic about paying my income taxes if they just took the money without asking. But the good news is we live in the United States of America, where nothing happens without our say so. ‘We the people’ have the power, and those civil servants who work for us—well, they’ll just have to get by on what we give ‘em to spend. These income tax rates—they’re EXACTLY what they should be. Thirty-nine and a six-tenths of one percent, that’s how much the government should get. I don’t remember voting for that, but I must have at some point—this is America, after all. But only 39.6%, not one penny more. You have to draw the line somewhere.  

And look at all we get for our money. I don’t know how they do it, but those government people must be geniuses. The government buildings—so many of them, so big and so beautiful. So well-appointed too, built with the finest materials. Once you get inside, everything is so clean, so purposeful, and so efficient. That’s the word for it—efficient.  Everything about the government runs like a well-oiled machine. The people who work there—so courteous, so enthusiastic, and so helpful.

We can thank the government—and our tax dollars—for the amazing prosperity we enjoy. Everyone is doing well. It doesn’t matter who you are, how smart you are, where you’ve gone to school, or what you’ve learned. Everyone who wants to work has a high-paying job doing exactly what he or she wants to do. Why it hardly feels like work at all! And if you don’t want to work, that’s fine too, because there’s plenty to go around. Beautiful, well-kept neighborhoods filled with large, gorgeous homes. And new cars everywhere. The only people who drive older cars are high-school kids learning to drive. Every one of those high-school kids, by the way, is headed for college too. Meanwhile, it’s hard to keep up with the new shops, new businesses, new schools, new hospitals, new roads, and new everything else springing up all over. And I mean all over the country, not just where I live. You gotta hand it to the people in the government—in addition to being as smart as all get out, they sure have the Midas touch.

All this abundance is amazing enough, but the real kicker is the peace. Peace everywhere in America, and all around the world too. Thanks to America, of course. They love us, everywhere. Everywhere you go, if you’re an American, you’re the toast of the town. Literally! "Mr. American, please, come in and have a drink. Mr. American, please, come into my shop. Please accept this gift, Mr. American. God bless you and thank you, Mr. American." Sometimes it’s just too much, too good to be true, and you just have to shake your head in disbelief.  And when you do, sometimes you’ll catch the eye of another American doing the same thing. I love it when that happens.

You might call what we have “utopia”, but I can assure you that everything isn’t perfect. Why just the other day I got a letter from the Internal Revenue Service saying that they’d accidentally withheld a bit more taxes than they should have. So I know the government makes mistakes. Heck, they’re only human. But they made good on it, and I have the refund check to prove it. Maybe the missus and I will try that new Thai place everyone’s talking about.

Justice Oliver Wendell Holmes once wrote that “taxes are what we pay for a civilized society”. He was a government employee at the time, so he knew what he was talking about. Bully for you, Ollie, and thank you and all your colleagues throughout the history of the U.S. government for your outstanding public service.

Happy April 15th, y’all!

How Much Should Health Care Cost in America?

Many believe that health care in America is very expensive. But few Americans actually know what health care costs them, because they don’t pay for it in the same way that they pay for food or other things they need.

It’s actually a good question: How much should health care cost in America? At the rate we’re going, we’ll never know.

How much should anything cost? How much, for example, should shoes cost? Should shoes be cheap, so people can spend their hard-earned money on other things? Or should they be expensive, so the shoemaker earns a good living?

Fortunately, in the case of shoes, car repair, and so many other things, we know how much they should cost, thanks to free markets.

Free markets are practically miraculous. Wherever human want can be satisfied by human talent, it will be, for the right price. Consider transportation and the incredible array of products and services available, from roller skates to airliners. It’s astonishing, but also entirely accurate to say that every possible transportation device that anyone in the world wants and can afford is available for purchase. Luxury cars that cruise over 200 miles per hour? Thousands own them. Star Trek-like teleportation?  Not possible, not yet. A lunar shuttle?  Bill Gates might be able to afford it, but apparently he doesn’t want one badly enough. If he did, someone would build one and sell it to him.

Adam Smith’s famous invisible hand really works. In a free economy resources automatically move to where they are put to the most efficient use, based on supply and demand. A free economy rewards innovation and efficiency. It punishes stagnation and inefficiency. A key element is information. When people have good information, prices find their correct level, through a process called price discovery. Of course, not everyone discovers the right price at the same time. Sharp traders with the best information score bargains. Uninformed traders get hammered.

Good information allows price discovery to work properly. Except, of course, when fraud or coercion intervene. Fraud is a common crime, but fortunately you can protect yourself against it in a number of ways, through expert knowledge, inspections, certifications, warranties, testimonials, etc. Coercion by definition removes the “free” from a free market. Coercion should be a crime, and it generally is, except when committed by governments.

Lack of information is one reason we don’t know what health care should cost. Although fraud is surely a factor, coercion is the main reason health care costs a lot more than many think it should.

A study by McKinsey & Company concluded that health care in America costs approximately 30% more than it should. How did they determine this? They compared the per capita cost of care versus the per capita GDP of several dozen countries. Richer countries, they found, tend to spend more on health care. That’s not surprising. But the data for all countries, save one, showed a close correlation between the two per capita GDP and health care spending. The outlier was, of course, the United States (see illustration).

Today, the per capita GDP in America is $53,000 per year. The per capita cost of health care is almost $10,000 per year, about 18% of GDP, and rising. (Fifteen years ago, America spent 13% of GDP on health care.) If McKinsey and Co. are right, the per capita cost of health care should be closer to $7,000 per year.

Still, it’s not really possible to know in advance what health care should cost. The only way to find out for sure would be to extend the free economy to health care, an industry that is very far from being a free marketplace, and unfortunately moving in the wrong direction.

Health care in America has been heavily distorted for years by government intervention. Federal and state government mandates on insurance coverage drive up costs and reduce availability. Government subsidies, including Medicare, push up demand, and therefore costs. The new Obamacare mandate that everyone buy insurance is an artificial boon to insurance companies directly, and the rest of the industry indirectly. Government licensing of health care providers restricts supply, also increasing costs. The tax-exempt status of employer-provided insurance is another distortion that stimulates demand.

Employer-provided medical insurance is unique to America. Why is this? Blame another government distortion: During World War 2, the federal government controlled wages and prices in a misguided attempt to contain wartime inflation. With few other ways to attract new employees, firms turned to fringe benefits which the government did not control. Employer-provided medical insurance became popular, lasting to this day, seven decades after the original wage and price controls were phased out.

Another problem is the way health insurance is used. Insurance is a risk management tool. You use it to protect yourself against rare events. If only one car in a 100,000 is stolen, the risk of one car being stolen, and the cost of replacing it, is spread across 100,000 policy holders. Each person pays as theft insurance a tiny fraction of the cost of a car. But health insurance policies generally cover routine care. That’s like using car insurance to pay for oil changes and gasoline.

Copays and deductibles adjust the math a little, but they don’t change the fundamentals—if health insurance covers routine visits to the doctor and everyday medication, the insurance company must charge more than what it pays out, if it’s going to stay in business. That means expensive insurance.

Lost to history is the once-common situation where an individual or family saved money for a medical procedure. The exception is elective surgery, such as lasik eye surgery or breast augmentation surgery, where people do spend their own money. The market for these procedures is open and competitive. But other medical procedures, many no more complex than these, cost many times more. Would they if the free market were allowed to operate?

Some blame the high cost of health care on business profits. They say that nobody should profit from another person’s need for health care. By this argument, no one who satisfies a human need should be allowed to make a profit. Food is a human need—does that mean farmers, food manufacturers, food transporters and grocers shouldn’t make a profit? People need water—so plumbers and water companies shouldn’t profit? Home builders provide shelter—no profits there either? And who decides what is and is not a human need? Cellphones satisfy the human need for communications—they even save lives in case of emergencies. Should cellphone providers forego profits too?

Remember that profits motivate people to provide goods and services in the first place. Without profits there wouldn’t be cellphones at all. Profits are usually small—most successful businesses earn just a few cents on every dollar’s worth of sales. But health care doesn’t cost a little bit more than it should, it costs a lot more than it should.

How about eliminating profits by putting government in charge? It's been done often enough for us to safely predict disaster. The worst examples of health care come from government-run monopolies: the Soviet Union and Cuba. According to Dr. Yuri Maltsev, a Soviet economist who defected to the US in 1989, health care in the Soviet Union was free and worth every penny. A majority of Soviet hospitals had no running water—and this was in the 1980’s. Cuba may well be worse. Maltsev calls the false reputation Cuba has for good health care “the best kept lie” about the country. Cuba has avoided the problem of obesity through a chronic shortage of food. Infant mortality is low, because the government registers newborns only after they reach six months of age. Hospitals have no pharmaceuticals beyond aspirin and a few topical ointments, although some medicines, mostly herbal remedies, are available on the black market. The widespread belief that Cubans enjoy excellent health care is a triumph of propaganda, sold to those who fervently wish it to be so.

Of course, we are told, those examples are too extreme. Great Britain is cited as having excellent state-run medical care. But we hear plenty to the contrary about poor care and long delays. One example: The long waiting time for emergency care became a popular issue not long ago. Politicians pledged to solve the problem. New regulations were issued. The result? Hospitals developed an elaborate queuing system for ambulances, stacking them like airplanes in a holding pattern until rooms and doctors were available. That’s because the wait time for emergency care did not start, legally, until the patient was unloaded.

Government-run health care may be great politics, but it’s poor health care. Decisions are dominated by politics, not by economics nor by medicine.

Suppose the health care industry had evolved without government distortion. How might it look today? In general, the supply of health care would match the demand, and prices would be determined by the free market. The specifics are hard to predict, as free markets can and often do produce creative, unexpected innovations—that is the nature of entrepreneurism. But here are a few of the more likely features:

• Health care insurance would be true insurance—it would spread risk of relatively rare events across a large pool of policy holders.
• Insurance would be purchased directly by consumers, not through employers.
• Parents would purchase insurance for children before they were born, as a safeguard against the risk of birth defects (the ultimate “pre-existing condition”).
• Routine doctor visits and medication would be paid directly by the patient, not through insurance.
• Information about the efficacy of medications, procedures, doctors and hospitals would become an important factor in decisions made by patients and insurers.
• People who could not afford health care on their own would be assisted by charitable individuals and organizations.

Some people cannot tolerate the idea that voluntary charity would provide the final health care “safety net” for poor people. I suggest that the poor would actually enjoy better health under this system than today’s system of politically-rationed care at prices inflated by government-driven bureaucracies. And it would have the advantage of morality-based funding, that is, voluntary funding, versus government’s immoral confiscation of property through taxation. Walter Williams has this to say about the subject: “Charity is one of the nobler human motivations. The act of reaching into one's own pockets to help a fellow man in need is praiseworthy and laudable. Reaching into someone else's pocket is despicable and worthy of condemnation.”

Patients today don’t have much information about the effectiveness of specific medicines, procedures, or practitioners. In a free market they would need and therefore demand information, which would become available from a variety of sources. Health care information and certification organizations analogous to United Laboratories would spring up. These would be funded by patients and insurers. Since their livelihood would depend upon it, these organizations would develop and carefully guard their reputations for accuracy and independence. (They would render obsolete today’s pseudo-governmental licensing boards, such as the American Medical Association.)

How would free markets handle care for seniors, who need more and more medicines and procedures as they age? The market would promote development of treatments that truly improve and extend life, and would weed out ineffective treatments. It would do so without distortions from government subsidy and regulation. The decisions to employ or refuse an expensive, risky, and potentially ineffective treatment in order to extend life would rest with the patient and his family, where it belongs.

There is no question that wealthy individuals would be able to afford the most advanced and expensive medical treatments. This is true today. It’s also true in many areas of economic life, not just health care, where initially expensive innovations consumed by a few become more and more affordable over time.

Thanks to the comprehensive distortion caused by government subsidies, mandates, and regulations, there’s no question that health care in America costs much more than it should. How much should it cost? Let’s make it a free market and find out.