That lesson has hardly been lost on designers of programs created since that time. Thus we have
farm support programs aimed at helping small family farms paying millions to large agribusiness
corporations, unemployment compensation programs paying factory workers during scheduled
summer shutdowns, and older Americans with millions of dollars of assets receiving payments
for routine medical care. That fact that so many of us, rich and poor alike, "belong" to one or
more of these programs gives them a political base that makes them all but untouchable.
But that popularity also creates inefficiencies, distortions, and tremendous bureaucratic inertia.
Because they offer universal coverage, programs like Social Security and Medicare are doing
much more than simply taxing the rich to support those of more modest means. They are also
taxing people of modest means to pay for each other's needs. Even under efficient
administration, the overhead associated with conducting these trillion dollar transactions is
immense.
What is most disturbing to economists, however, is the "dead zone" universal entitlement
programs place between their participants and the realities of the marketplace. Signals sent by
the market -- which would ordinarily guide the economy to a more sensible distribution of
resources -- never get through to us as we make our decisions about what to produce and what to
buy. Thus in a market glutted with dairy products, price supports cause farmers to produce more
milk. And huge increases in prices for many prescription drugs have done little to curb demand,
thanks to the coverage offered by many health plans.
Of course, every worthwhile social program, from food stamps to tax refunds, imposes some
kind of distortion on the market economy. But when the programs grow to nearly half a trillion,
those side effects can be as bad as the original disease. There is little doubt, for example, that
Social Security has caused Americans to save less on their own, reducing the pool of resources
available for investment, or that unemployment compensation increases employment in seasonal
industries.
The feeble voices of a few economists are likely to go unheard in the coming weeks, however as
the Democratic leaders of the U.S. Senate take up the so-called patients' bill of rights legislation
in Washington. Should HMO's and other health plans be required to allow their patients to
direct access to medical specialists, to include contraceptives in prescription drug coverage, or to
extend limits on hospital stays? As an affluent and caring society, we certainly ought to assist
those who are unable to meet essential medical needs. But some of the rhetoric in Congress
suggests that the only way for us to keep needy families afloat is to raise the Titanic.
Some would have you believe that the only way we can address the needs of families and
individuals for retirement income, medical care, or child care, is through universal social
programs that extend resources to all by right. The price tag for this generosity, however well-intended, should give us all a case of sticker shock, and encourage us to pursue more targeted,
more efficient approaches to the problems requiring attention.