I blog about free markets in medical care and transparent pricing.

 

"Bail Outs" Are Really "Bail Ins"

Lew Rockwell described the General Motors bail out as follows.  Imagine that you have saved enough money to by a car.  After doing careful research you decide that you want a Toyota.  Uncle Sam says, “NO!”  ”You must buy a Chevrolet!”  The funds are taken out of your account and deposited in the General Motors account.  The catch?  You don’t get  a car!

I don’t like the use of “bail out” as a phrase that indicates a rescue of sorts.  I prefer to think of “bail out” as ejecting from a burning airplane leaving everyone else on board to fend with the mess.  Isn’t this what the GM bailout really was?  ”What was seen” was GM continuing to operate.  What was not seen was the robbery of the taxpayers and the ruin inflicted on those holding GM’s bonds.  

"Bail out" can also mean scooping water out of a sinking ship or vessel.  The key to understanding this use of the phrase is that the ship is sinking.

I think it would be more honest to start using the phrase “bail in.”  This phrase would be more useful in that Uncle Sam’s role might be more clear as the distributor of money stolen from taxpayers to political or corporate favorites.  Solyndra is a great example of a “bail in.”  Your money and mine was “bailed in” to that poorly conceived black hole.  We have involuntarily participated in countless “bail ins” for big banks over the years, institutions deemed “too big to fail.”  

I have begun to think of Medicare as a “bail in” effort.  Rather than declare this Ponzi scheme a disaster, voters over the years have tarred and feathered anyone suggesting even the slightest change in this program.  ”Don’t touch MY Medicare!”  ”I have paid in to this for many years and now I want my benefits!”  The current Medicare beneficiaries receive their “benefits” not from money they paid in, but rather from money others currently pay and even money that future generations will pay.  Medicare is being “bailed out” by bailing young people’s money in.  

If a private company had Medicare’s balance sheet, it would be declared bankrupt, broken up and sold off and those that had put money into the organization would take their lumps, recognizing they had contributed to a failed enterprise and learned their lesson.    However, as a government institution, Medicare has the power to bail the money of future generations in to this financial abscess, only to make the boil even larger.  Cries from Medicare beneficiaries continue and the politicians respond just as you think they would, maintaining or increasing the benefits to this powerful voting bloc.  

Some politicians paid a big price for voting for the various bailouts.  I don’t see the difference between that and political promises to “save Medicare.”  Placing Medicare in to receivership won’t be easy and can’t be accomplished quickly as too many folks have come to count on this program to provide funding for their health care.  That said, I believe it is irresponsible and immoral to continue to present future generations with the current health care bills of today’s Medicare population.  Is it possible to end the confiscatory “bail in?”  Is it possible for a group of the elderly to endorse the end of the robbery of our young, and those struggling to make their own ends meet?

G. Keith Smith, M.D.

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