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April 2017 Policy Study, Number 17-8


A Commentary on American Public Policy


Part 17



Near the beginning of this topic, we discussed the genesis of insurance in this country.  It was explained that back then insurance was in the form of mutual insurance. You were asked to remember the nature and operational behavior of how mutual insurance worked.  You will recall that one of the disadvantages of mutual insurance was that you were liable for the claims of all the other members of the association.  If the liability of some of the other members was greater than estimated by the association, you, as a member, were liable for your prorated share of the increased liability.  Your liability was not limited to the premium you paid.  Still, it was a voluntary association, and if you were dissatisfied with the association, you could disassociate yourself from that association at the end of your period of contract.


Well, using government as the insurance agency of last resort behaves in exactly the same nature as a mutual insurance association with two glaring exceptions.  The first is that if you are dissatisfied, you can’t get out.  The second is that your liability to the association (government) is not prorated, but it is instead progressive by virtue of our current income-tax system.  The author finds both of these conditions to be repugnant and reason enough, in themselves, for rejecting the agency of government as social insurer.  But setting aside my personal bias, there are still better reasons to reject government as insurer on any grounds other than those specified in the Declaration of Independence. 


The first reason is that a government that is the dispenser of social benefits reduces those who take advantage of the government’s largesse to a condition of dependency and therefore to the eventual condition of servitude.  Even if one were to accept the previous stipulation (eventual servitude) as unobjectionable, there is yet another very practical reason why we should not be attempting to use government as the agency to insure social benefits.  That second and extremely important reason is this:  it simply cannot be sustained interminably.  The practice will, inexorably and most assuredly, destroy the very government that made it possible in the first place.  All governments that have committed to this practice have failed, the USSR being a prime example, or are currently in the process of failing, like Cuba. 


How can we be arrogant enough to believe that the outcome for our nation will be any different?  As John Adams said, “Remember, democracy never lasts long.  It soon wastes, exhausts, and murders itself.  There never was a democracy that did not commit suicide.”  And: 


A democracy cannot exist as a permanent form of government.  It can only exist until the voters discover that they can vote themselves money from the public Treasury.  From that moment on, the majority always votes for the candidates promising the most benefits from the public Treasury, with the result that a democracy always collapses over loose fiscal policy.  (The Decline and Fall of the Athenian Republic by Andrew Tyler Fraser).


As you can see, what we are about to discuss is nothing new, although it seems to have escaped our attention at present.  It is just one of those lessons of history that must be relearned from time to time, and occasionally it is a very painful relearning experience.  The quote from President Adams informs us of what happens to governments that employ absolute democracy as their only form of administration.  The second quote starts to place a finger on just exactly why the destruction takes place.  To refine the point further, consider the following comment.  During the 1996 presidential election cycle, the author went to see one of the potential presidential candidates.  He happened to be discussing the national healthcare program that was then being touted by the Clinton administration, which would have nationalized or socialized medicine — take your pick.  The comment is given as the author remembers it:


If the government supplied us with our daily bread in the same manner that it proposes to supply us with our medical care, I’d eat a whole lot better than I do now, and so would my dog.  (U.S. Senator Phil Gramm of Texas).


Did Gramm just tell us he was a greedy, unfeeling Cretan, or did he inform us that he was aware of an unseemly side of human nature to which we are all disposed?  The author believes it to be the latter.  There is a facet of human nature that sometimes trespasses beyond mere self-preservation:


But there is also another tendency that is common among people.  When they can, they wish to live and prosper at the expense of others.  This is no rash accusation.  Nor does it come from a gloomy and uncharitable spirit.  The annals of history bear witness to the truth of it:  the incessant wars, mass migrations, religious persecutions, universal slavery, dishonesty in commerce, and monopolies.  This fatal desire has its origin in the very nature of man — in that primitive, universal, and insuppressible instinct that impels him to satisfy his desires with the least possible pain.  (The Law by Frederic Bastiat).




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