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Posted at 11:44 AM ET, 01/ 5/2011

What libertarians should, and shouldn't, be blamed for

By Ezra Klein

Ross Douthat is right to say that worrying about what would happen if Ron Paul seized ultimate power and decreed America a minarchy probably isn't a good use of anyone's time. But where Douthat thinks that minarchy is used as a way to dismiss libertarians, in practice, I've tended to find it their first line of defense -- the right's version of "well, Marxism has never really been tried."

To some degree, you see it in Douthat's post, when he quotes Conor Friedersdorf lamenting "that libertarians hold very little power in this country." The reality is that the sort of incremental libertarianism that aligns with the interests of rich individuals and corporations has quite a lot of sway in Washington, but it routinely manages to escape the consequences of its ideas because, libertarians argue, the world we live in isn't the world they would've built, and so how can they be asked to answer for it? It's the "don't blame me. I voted for minarchy" defense.

But if the argument is that incremental libertarianism deserves more respect, then it also deserves more accountability. Desperate storytelling about Fannie Mae and Freddie Mac aside, the financial crisis was, in large part, the product of the idea that massive financial markets that we didn't understand would effectively regulate themselves. Alan Greenspan, perhaps the only man in America with the unilateral power to have prevented the blowup, has been quite clear on the flaw in his thinking: "Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity — myself especially — are in a state of shocked disbelief."

To a first approximation, that was a failure of not just a crucial pillar of libertarian economic thought, but of libertarian practice: We spent the '90s not just deregulating, but much more dangerously, refusing to enact new regulations even as the financial system changed dramatically. One of the key players there was Sen. Phil Gramm, who certainly has his fans at the Cato Institute. His was the sort of libertarianism that is politically potent because it is backed by lots of money and lots of elites who combine to push it into the public discourse.

Taxes are another example. Plenty of libertarians have lined up for repeated tax cuts under the theory that they would stoke enough growth, and force enough compensatory budget cutting, to put the country on a more sustainable fiscal path. Plenty of wealthy individuals and firms have pumped a lot of money into propagating that theory and rewarding politicians who vote they way it asks them to. That theory, however, has been a disaster as a policy matter, even as the individuals and firms have made a lot of money.

And there's a lot of power, of course, lined up against anything that gets us close to single-payer health care. Most of the arguments made in that debate are fundamentally libertarian ones: that it will reduce freedom, or that government programs are inevitably bloated and wasteful ("Like going to the DMV? You'll love government health care!"). Cato's policy wonks spent much of 2009 on television arguing against reforms that would mean more government intrusion into the marketplace. Politicians and political organizations, meanwhile, received a lot of money and support in exchange for making those arguments. But it's of course true that America, being the developed country with the least nationalized health-care system, also spends the most and has the highest rate of uninsurance.

So when Douthat says that "a more-empowered libertarianism could have a salutary impact on debates over, say, the future of the entitlement system," it's worth asking what impact semi-empowered libertarianism has already had on debates over the entitlement system. That libertarian dreams of a privatized (or completely dismantled) Medicare system haven't come to pass is no more relevant than dreams of minarchy. What has come to pass is an aggressive and successful effort to stop America from following other countries' paths to national health-care systems. And the result can be seen here: If our costs had followed their costs, we'd have no budget deficit to speak of. Libertarians shouldn't have to answer for minarchy. But they do have to answer for that.

By Ezra Klein  | January 5, 2011; 11:44 AM ET
 
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Comments

so we can pretty much blame everything on libertarians?

Posted by: eggnogfool | January 5, 2011 12:44 PM | Report abuse

forget Libertarians, how much can we blame on Liberals and Pelosi?

Interested to see how many vote against nancy. I'm sure the conservative twitterverse is going to be all aglow with links to Nancy handing over the gavel to Speaker Boehner.

Posted by: visionbrkr | January 5, 2011 1:04 PM | Report abuse

Brilliant post!

Posted by: puzzlemuse | January 5, 2011 1:16 PM | Report abuse

I don't care what "libertarians" have to say about entitlements, frankly. If I've learned anything from this group based on their effect on the GOP and the crude philosophy they spread around the web, it's that they do not take into consideration the people who most need safety nets at all.
There are the nice "libertarians" who assume that the market will magically save the poor and there is the Ayn Rand variety who just view the poor as worthless parasites that we're better off without.
It's against every fibber of their being to admit that some people might need help sometimes and that members of a society owe some portion of their success to that society and improving the lot of all those involved.
At least real conservatives, when pressed, will be engaged in reality, and, when pushed on the issue, have some compassion for the poor (as well as a belief that the miserly should at least be publicly shamed into giving privately rather than put on a pedestal as moral examples for us all).

Posted by: RCBII | January 5, 2011 1:30 PM | Report abuse

Ezra, please.

This piece implies that Greenspan was a libertarian, which any thinking person should know is not true. He was many things - an opportunist, a self-promotor, a shill, but not a libertarian.

Posted by: slantedview | January 5, 2011 1:35 PM | Report abuse

Liberals:


Repeat after me


Speaker John Boehner


Speaker John Boehner


Speaker John Boehner


Speaker John Boehner


Speaker John Boehner


Speaker John Boehner


Speaker John Boehner

Thank you. No more jamming through the liberal agenda against the will of the American People


.

Posted by: RainForestRising | January 5, 2011 1:43 PM | Report abuse

The regulatory and tax environment of the aughts was no where close to libertarian, Ezra. You're grasping at straws.

If the $4 trillion health, pension, welfare and education entitlement leviathan isn't performing as you expect, it isn't the fault of libertarians. The people fighting Democrats all these years are Republicans, and as the Bush years showed they are no libertarians. They use libertarian sounding arguments at times, but when in power they toss those arguments into the trash, and start wars and create new entitlements.

Also, always keep in mind that pro-business does not always - and often doesn't - equal libertarian.

Posted by: justin84 | January 5, 2011 1:53 PM | Report abuse

"Taxes are another example. Plenty of libertarians have lined up for repeated tax cuts under the theory that they would stoke enough growth, and force enough compensatory budget cutting, to put the country on a more sustainable fiscal path."

Slightly tweaking the Clinton era tax rates isn't very libertarian. In aggregate, U.S. government revenue fell from 37.25% of GDP in 2000 to 37.20% of GDP in 2007. Marginal rates fell slightly. I'm not sure why a libertarian would expect an economic surge on account of that. It would be analagous to Republicans giving every person $250 each year to spend on health care, and then when some people couldn't afford payments, declaring that liberal policies of helping people buy health care fail.

http://www.usgovernmentrevenue.com/downchart_gr.php?year=1995_2015&view=1&expand=&units=p&fy=fy11&chart=F0-total&bar=1&stack=1&size=m&title=&state=US&color=c&local=s

"What has come to pass is an aggressive and successful effort to stop America from following other countries' paths to national health-care systems."

Really? I thought Democrats deep sixed NixonCare...

"If our costs had followed their costs, we'd have no budget deficit to speak of."

And costs would be half as much as Europe's if we had a free market. Singapore - which is closer to a free market than either America or Europe - spends less than half of what France does on health care. When people are using their own money, the results tend to be better quality and lower prices.

Remember this?
http://www.theatlantic.com/magazine/archive/2009/09/how-american-health-care-killed-my-father/7617/

Would you pay a $636,687.75 bill for a treatment that resulted in the death of your father? I'd tell those people to go pound sand - I wouldn't pay for a TV that exploded when I turned it on either. But Medicare does pay those bills, with money forcibly taken from people who, on their own, would never consider it.

Our cost problem is entirely a result of government pumping money into the health sector, while not being able to force cost controls on the same sector with the same effectiveness as the Europeans.

Posted by: justin84 | January 5, 2011 1:55 PM | Report abuse

"Desperate storytelling about Fannie Mae and Freddie Mac aside, the financial crisis was, in large part, the product of the idea that massive financial markets that we didn't understand would effectively regulate themselves."

Ezra, you obviously seem to be in the drone camp that thinks the "era of deregulation" brought about the financial crisis. So tell me just one law that was repealed that had a direct cause on the financial crisis. Just one. You can't. (hint: Glass-Steagal didn't have anything to do with it)

Posted by: sentinel18 | January 5, 2011 2:09 PM | Report abuse

"it's that they do not take into consideration the people who most need safety nets at all."

RCBII,

Many libertarians do take that into consideration, but they believe it is immoral for you to point a gun at someone's head and demand funds for your priorities, no matter how well intentioned, and no matter if you have zero votes backing up your use of force or 100 million.

As an aside, they also believe that top down intrusions into a highly spontaneous order can and do create serious unwanted side effects. Some libertarians do actually accept small safety nets on what they view as pragmatic grounds, though remain libertarians for this reason.

If your causes are really so wonderful, people will give to them voluntarily (and much more readily if they get to keep their whole incomes and if the state isn't in the charity business on their behalf). If not, not.

Posted by: justin84 | January 5, 2011 2:13 PM | Report abuse

Ezra, wow, this is the worst post you've written in months. Too many errors for me to even write about. I'll leave it to justin84 who actually IS a libertarian to rebut.

Posted by: 54465446 | January 5, 2011 2:16 PM | Report abuse

"His was the sort of libertarianism that is politically potent because it is backed by lots of money and lots of elites who combine to push it into the public discourse."

Meanwhile denouncing liberals for elitism. It's amazing how hard libertarians leverage populist rhetoric for policies that so baldly cost the majority of the populace in greater exposure to the abuses of corporate power and in less access to basic goods like healthcare, education, and the like. People need to wake up start learning to call BS.

Posted by: Trogdorprof | January 5, 2011 2:26 PM | Report abuse

"Ezra, you obviously seem to be in the drone camp that thinks the "era of deregulation" brought about the financial crisis. So tell me just one law that was repealed that had a direct cause on the financial crisis."

Geez, sentinel18, at least finish reading the post before you comment. He addresses your criticism is his VERY NEXT PARAGRAPH.

Posted by: Fishpeddler | January 5, 2011 3:11 PM | Report abuse

Yes, there is influence of libertarian thinking in America. But to merely try to associate it with corporate interests is silly. The rise of equality of rights for gay people is entirely consistent with libertarian thinking. Opposition to government torture programs is consistent with libertarian thinking. Opposition to the wars is consistent with libertarianism. So too is trying to end police abuse of their powers, ending the death penalty, reproductive rights, ending bullying of kids in the school system, opposition to censorship, the legalization of medical marijuana, immigration reform and/or amnesty, etc.

As for those corporations, they have power because government always benefits the rich and powerful. The big fraud in American politics comes from those who whine about corporations and then create political programs that they KNOW will be captured by the corporate elite. Big government and big business are allies not enemies. And government power will mostly be used to benefit the rich and the powerful, not the poor and the powerless.

Corporate America manages to do what it does because big government types, such as the author, enable them.

Posted by: JPeron | January 5, 2011 3:13 PM | Report abuse

Only in the wonderful world of Ezra Klein is a single man in Washington setting the price of credit for the economy a failure of libertarianism.

Posted by: cdosquared5 | January 5, 2011 3:18 PM | Report abuse

justin84,
The very problem I see with libertarian philosophy is that the well-being and even basic rights of the weakest and poorest are dependent on welfare programs being wonderful enough to get everyone to voluntarily pitch in.
This implies that the basic rights of the weakest and poorest are merely luxury items for the wealthy- only valuable in that wealthy people value them, and only to that extent (and if the Ayn Rand strain is the dominanat one, that's not much of an extent).

I'm all for finding ways to get innovation into the welfare state, even increase the participation of non-governmental agents.
But there has to be a line that is drawn as to what the minimum standard is for a person's life- and that should take into account life, liberty, and the pursuit of happiness.
And these rights should not be subject to charity fads, the good will of the rich, or other market forces. That means they must be backed by the state.

Posted by: RCBII | January 5, 2011 3:21 PM | Report abuse

This is an embarrassing use of straw man arguments. Maybe after Hillary gives her third ball to Obama she can give her fourth to you.

Posted by: cdosquared5 | January 5, 2011 3:21 PM | Report abuse

54465446 wrote: "I'll leave it to justin84 who actually IS a libertarian to rebut."

Not a good idea. Justin84 essentially argues that no policy has been perfectly libertarian, so libertarianism cannot be held accountable for any failure of policy. While this argument is slick and convenient, it is also entirely unpersuasive. The influence of libertarian ideology on the policy preferences on many political elites, almost entirely within the Republican party, is manifest. And our nation has suffered tangibly as a result of their being under the sway of an ideology with such an unsound economic and moral foundation.

Posted by: Fishpeddler | January 5, 2011 3:40 PM | Report abuse

sentinel:

Such a tease. I can hardly wait! LOL

Posted by: 54465446 | January 5, 2011 3:43 PM | Report abuse

Fish:

Ok to make it ridiculously short, Ezra uses libertarian interchangeably with being violently pro-business and anti-business regulation. For instance Phil Gramm was an inveterate assasin and sometimes ninja-like stealthy de-regulator, but NEVER a libertarian, nor was Alan Greenspan. Being an incredibly greedy businessman seems to have little to do with actually being a libertarian.

Did I catch it right Justin?

Posted by: 54465446 | January 5, 2011 3:51 PM | Report abuse

Good analysis Ezra. Libertarians have had greater impact on rhetoric and who wins elections than on the policies that result, but these impacts have dramatically changed policies little-by-little over the past 30-some years.

Speaking of rhetoric, I see justin84 (for good reason) likes a free market health care system that is based on compulsory healthcare savings from payroll deductions, a nationalized catastrophic health insurance plan, government subsidies (ranging from 50 to 100 percent for citizens depending on means-testing), and active government regulation of the supply and prices of healthcare services. Not a bad free market system, depending on how libertarian a person is.

Posted by: pjro | January 5, 2011 4:29 PM | Report abuse

Amusing to see the libertarians here flee like frightened rabbits from the real-world consequences of their beliefs: "Phil Gramm didn't really believe in unregulated markets! He was just a greedy politician!"

Ezra nails it--the calculated lack of regulation of these shiny new investment vehicles was a libertarian's dream come true, and our nation's nightmare.

Posted by: steveandshelley | January 5, 2011 5:50 PM | Report abuse

Bizarre that Ezra would attribute problems in the financial and health care sectors -- arguably the two most regulated sectors of the economy, rent with government interventionism -- to libertarians.

But he is correct that libertarians have helped influence policy on the margin in many areas. Let's look at them:

Airline, trucking and rail deregulation: A smashing success, with costs way down since implementation. A huge boon to consumers.

Welfare reform: Origins with Charles Murray. Another great success.

School vouchers: Kids in such programs perform no worst, and perhaps slightly better, than their public school counterparts. Hey, getting the same results for less money is a win.

The left, meanwhile, has given us poor public schools, poor public housing, Medicare and Social Security programs that threaten to bankrupt the country, etc. When is the last time the left had a good idea?

Posted by: grabowcp | January 5, 2011 7:48 PM | Report abuse

"Amusing to see the libertarians here flee like frightened rabbits from the real-world consequences of their beliefs: "Phil Gramm didn't really believe in unregulated markets! He was just a greedy politician!"

Ezra nails it--the calculated lack of regulation of these shiny new investment vehicles was a libertarian's dream come true, and our nation's nightmare."

steveandshelley,

If you think the financial system of the 2000s was in anyway a libertarian's "dream come true", then my friend, you must be smoking something that would only be legal in a libertarian society.

There was plenty of regulation and government intervention in the aughts - it just didn't do any good. Your preferred system depends on more or less perfect regulations and regulators. Good luck with that.

Posted by: justin84 | January 5, 2011 8:18 PM | Report abuse

Do not conflate libertarianism with corporate cronyism, which uses political clout to gain unfair business advantages. Just because Republicans (or anyone) are pro-business and also support corporate cronyism does not make them libertarian.

Posted by: slantedview | January 5, 2011 8:29 PM | Report abuse

"Did I catch it right Justin?"

54465446,

I'd say so.

The idea that libertarians caused the financial crisis is as absurd as claiming that the USSR's economy failed because of glasnost and perestrokia, more so, in fact, because the 2000s didn't actually see a libertarian financial system.

It's not like we got rid of FHA, FNMA, FHLMC, GNMA, OCC, OTS, FDIC, CFTC, FINRA, NCUA, Fed/FOMC, SEC, a long history of bailouts, NRSROs, local land use restrictions, Basel, numerous financial laws and regulations, tax incentives to use debt finance or buy homes, etc.

Are libertarians to blame for the Iraq War too? Yikes.

Posted by: justin84 | January 5, 2011 8:38 PM | Report abuse

"Not a good idea. Justin84 essentially argues that no policy has been perfectly libertarian, so libertarianism cannot be held accountable for any failure of policy. While this argument is slick and convenient, it is also entirely unpersuasive."

Fishpeddler,

Policy hasn't been anything close to libertarian in living memory, much less so recently. If I turn down the thermostat from 72 to 70 in the winter, and the heating bill jumps, it would be absurd to attribute part of the increase to my act of turning down the heat.

"The influence of libertarian ideology on the policy preferences on many political elites, almost entirely within the Republican party, is manifest."

LOL. The eager prosecution of the drug war, Iraq/Afghanistan, global empire, PATRIOT Act, defense of marriage act, Medicare Part D, a tax policy in which 37% of GDP was taken by the government all levels (2007), No Child Left Behind, abiding massive intervention into most sectors of the economy - yeah, these guys are real libertarians. Kennedy cut taxes - was he a libertarian too? Heck, you could probably call Deng Xiaopeng a libertarian under your definition of the word.

"And our nation has suffered tangibly as a result of their being under the sway of an ideology with such an unsound economic and moral foundation."

Unsound moral foundation? Your economic system's moral foundation is state sanctioned theft!

Posted by: justin84 | January 5, 2011 9:10 PM | Report abuse

Oh we have a clever racist Jew here. Why is some racist Jew like this Kline taking a swipe at Libertarians? Because he knows the likes like Greenspan and his kind have worked for his Jew money trust and controlled credit and banking friends since 1913. Charging interest and promising something for nothing and racking up debt along the way. And the racist Jew knows his gig called the Federal Reserve that creates credit and endless debt straight out of thin air, is almost up so he has to invent enemies like “Libertarians”. He knows good & well there isn’t anything “Libertarian” about his “free markets” he’s controlled since 1913. He knows that with 48 million on food stamps, housing tanking, foreclosures and bankruptcies on the rise, unemployment at 20 percent, the myth of Social Security his kind have sold us (oh by the way there is no such thing as a social security trust fund dummies every penny goes into the general budget as was spent) through the years is running dry, a banking system on thin ice and the austerity that his Republican and Democratic bought and paid friends are about to spring on the public he’d best come up with some clever writing attacking an ideology called “Libertarianism”. Kline and his filth thought Libertarian ideas like no central bank, money only issued out of gold and silver and not creating credit out of thin air and charging interest, were dead long ago until the great Dr. Paul came along. Now this little boy has to try and convince the reader’s that central bankers like Greenspan were Libertarians. Now he has to convince everyone his controlled “deregulated” “free market” his money changer friends created was to blame. He has to convince you it is Dr. Ron Paul whom is to blame. He has to convince you everyone but him and his kind is to blame and are the dangerous ones. You don’t fool me racist Jew.

Posted by: joe49 | January 5, 2011 11:00 PM | Report abuse

The New York Magazine article Ezra linked to contains the following patent nonsense, thereby undermining the author's authoritative voice:

"The American Revolution was a libertarian movement, rejecting overweening government power. The Constitution was a libertarian document that limited the role of the state to society’s most basic needs, like a legislature to pass laws, a court system to interpret them, and a military to protect them. (Though some Founders, like John Adams and Alexander Hamilton, wanted to centralize power.)"

"A legislature to pass laws" is "limit(ing) the role of the state to society’s most basic needs"?

Article I (right at the top!) says Congress has the power “to make all laws which shall be necessary and proper” for carrying out the powers of the federal government.

Further undermining the author's presumed grasp of his subject is his parenthetical remark, "(Though some Founders, like John Adams and Alexander Hamilton, wanted to centralize power.)"

Aside from the fact that the issue of federal versus states' power is not a core libertarian issue, the author implies that "some" Founders who favored federal power were -- of course! -- unsuccessful. Huh?

Posted by: fredbrack | January 6, 2011 4:57 AM | Report abuse

You say that libertarians favor tax cuts under "the theory that they would stoke enough growth, and force enough compensatory budget cutting". In fact most libertarians, and Republicans in general, have been implying since Reagan that tax cuts create so much growth that they pay for themselves with the extra revenue generated by that growth.

This strategy has been so successful - because neither the "liberal" media nor Democrats have rarely bothered to tell people that this seductive idea is blatantly false - that many Republicans are now claiming outright that tax cuts pay for themselves. Even Bush's own top economic advisers rejected this claim, estimating that at best a tax cut might return 50% of lost revenue, but that the return is usually much less but the public is almost never told this.
The WaPo's article "Mr. Guiliani and the Tax Cut Fairy" which gives the Bush administrations position on the effect of tax cuts was rare exception to the media's silence on this issue. The facts covered here should be memorized and stated repeatedly every time a Republican claims (or implies) that tax cuts are cost free. It will take a lot of work from the media, Democrats and ordinary Americans to get out this message before the damage of this thirty year lie will be undone but until people learn the truth we will never get our fiscal house in order.

Posted by: BernieO | January 6, 2011 9:02 AM | Report abuse

"Desperate storytelling about Fannie Mae and Freddie Mac aside, the financial crisis was, in large part, the product of the idea that massive financial markets that we didn't understand would effectively regulate themselves."

I find the assertion of many who claim that the evidence for free market failure is obvious because well..the free market failed to be selective in what they see.

We have NOT had a free market in many areas of life. To claim that the financial crisis failed because the free market failed is illogical because the financial market is NOT a free market, and I'm not talking about Sallie and Freddie. The financial market is HIGHLY regulated, both via law and indirectly by politics.

I don't claim that unregulated markets are always efficient, but to claim that regulated ones ARE more efficient ignores what has happened in areas that we keep thinking we can understand and control.

"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."
— Friedrich von Hayek

Posted by: Dug0915 | January 6, 2011 9:19 AM | Report abuse

1. Most libertarians support simple wage subsidies for the poor and some level of subsidized health-care as long as the incentives, even for the poor, are to use less .

2. Government preformed no better than the market in the bubble years and their where only a very few liberals shouting bubble (I can only think of one Dean Baker. He has my respect). Liberals did not support policies that would have pushed home prices down.

One could also argue that Bush/Greenspan's missing the difference between correlation and causation and so pushing the ownership society was contributor. (They thought that more home owners would vote more Conservative/Libertarian rather than more Conservative/Libertarian owning homes.) Gov. pushing up ownership is Hardly a libertarian move.

Posted by: jwogdn | January 6, 2011 11:26 AM | Report abuse

(sarcastically)Greece and Spain must have the most influential libertarian movements.

Posted by: jwogdn | January 6, 2011 11:33 AM | Report abuse

...the right's version of "well, Marxism has never really been tried."

The mere mention of this oft-repeated canard betrays Mr. Klein's immaturity. Armchair leftists will trot it out believing it to be true, while the truly hardcore Marxists will insist quite the contrary - that doctrinal Marxism HAS been tried and to an extensive degree. That it failed was not indicative of its faults but rather that it wasn't implemented aggressively enough. It's an experiment many would eagerly revisit. Not at all coincidentally, the most notorious regimes were also Marxism's most faithful adherents. I recommend that Mr. Klein do some further reading on the subject, because his current commentary is on par with claiming that "libertarians are just Republicans who smoke pot"; it's naive and completely uninformed.

Posted by: ---Michael--- | January 6, 2011 11:44 AM | Report abuse

' "Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity — myself especially — are in a state of shocked disbelief." '
- These lending institutions have seen their incentive for protecting the shareholder's interest erode severely since the 1980s, due principally to the replacement of partnerships with common shareholders. In the real world, the vast majority of common shareholders have little understanding of the inner workings and risks taken within a company as complex as a lending institution. Under partnerships, the partners have much more direct control over risk taking, and are thus better able to preserve their own interests.

"Taxes are another example. Plenty of libertarians have lined up for repeated tax cuts under the theory that they would stoke enough growth, and force enough compensatory budget cutting, to put the country on a more sustainable fiscal path." - Ezra
- This is aimed at the wrong group. Libertarians do not believe making tax cuts will magically force politicians to make budget cuts. Libertarians want BOTH tax cuts and budget cuts. The Reagan era, however, led many conservatives to espouse the idea that "deficits don't matter" and replace taxes with borrowing.

"But it's of course true that America, being the developed country with the least nationalized health-care system, also spends the most and has the highest rate of uninsurance."
- Nor do we have a health insurance market without major destructive distortions. There are many reasons why our health system is more inefficient. The two most grievous, in my opinion, are: tax exempt status for health insurance, effectively linking health insurance to employment; and over reliance on third-party payer payment of medical bills, which disables the price mechanism, encourages overconsumption, and fails to give an incentive for cost reduction.

Best,
Casey

Posted by: cthorm | January 6, 2011 12:33 PM | Report abuse

Ezra is about a year older than I am and I am absolutely mystified by the attention he receives. Whenever he steps out of his comfort zone, he is at best facile. Reading a post by Klein is like reading Democratic Party talking points instead of actual analysis. For instance, comparing libertarians arguments that minarchy has never been tried to those of Marxism. When Marxism-lite has been tried, you had the Russian war economy and the Cultural Revolution. When libertarianism-lite has been tried, you have some of the greatest creation of wealth in human history. Even someone who does not believe in minarchy would recognize how stupid an argument that is.

As noted above, his take on the financial crisis was pretty mistaken. If you have monetary policy determined by bureaucrats in Washington, you don’t have a free market. Libertarians across the board have criticized the damage that central banks can do to an economy. Many consider this to be even more significant than Fannie/Freddie’s deteriorating lending standards. Free markets can regulate themselves well, but that doesn’t mean every firm is perfect. The free market punishes firms that have poor corporate accountability and make unsound investments. If you bail out institutions that fail, then the opposite occurs. Further, the government mandates poor risk management practices and regulations through Basel and NRSROs. If the government changes the incentives to make holding level 3 assets more attractive, you’ll be damn sure that banks will try to take advantage of that. In addition, he never addresses what regulations did we got rid of that would have prevented the financial crisis? Glass-Stiegel? The commercial banks that merged with investment banks seemed to fare better than just the investment banks (Lehman and Bear). Also, he ignores that JPMorgan had effectively bypassed Glass Stiegel (by allowing it to participate in corporate debt offerings) for nearly a decade before it was repealed and they had among the strongest performance of the major banks during the crisis.

Posted by: ss4johnny | January 6, 2011 1:26 PM | Report abuse

More:
I’m not sure what libertarians you read, but far more care more about spending cuts than they do about tax cuts. One way to confirm this would be to look at the writings of the top 5 or 10 libertarians (not just the ones you dislike who work for Cato, but the ones that actual libertarians would say are the most important). How many of these would have said in the early 2000s that we should cut taxes to force the government to reduce spending? I would guess none. Largely because it is a Republican idea that has not worked. How many Republicans at the time were listening to libertarians say to cut taxes and not spending? Why are libertarians getting blamed for poor Republican ideas? Can you not tell the difference? I only wish I could ignore the dig you made at Veronique de Rugy’s piece which seems to not relate at all to your point about the recent history. Less than a month later she wrote this: http://www.cato.org/pub_display.php?pub_id=3051. She doesn’t seem to support the tax cuts unless the President slashes spending further. She’s not saying to use tax cuts to force spending cuts. She’s saying cut the spending first. You just completely misinterpreted her position at the time.

Here’s a hint, many libertarians hold their beliefs regardless of who is paying them. Do I criticize you for being paid off by the corporate owners of WaPo? No. Because I think you genuinely believe what you write (no matter how stupid I think you are). You should have the courtesy of thinking the same is true for others.

I genuinely think that you are only popular because you have an unusual sounding name.

Posted by: ss4johnny | January 6, 2011 1:27 PM | Report abuse

As a courtesy to the nature of thoughtful discourse, I'd ask you to learn the difference between pro-business lobbyists trying to selectively de-regulate to favor a particular company or industry and de-regulation that removes the vast array of unintended consequences and perverse incentives that federal mandates usually create.
In plain English: Actually learn something about libertarianism before holding them accountable for the problems an overreaching federal government has created. The Deepwater Horizon oil rig was inspected by federal agents operating under federal regulations. That sure worked out well.

Posted by: chadreese | January 6, 2011 1:41 PM | Report abuse

The fundamental error here is that Libertarians aren't doing things, along with confusing them with right-wing users of some Libertarian-direction tools. For information on world Libertarians at work, see http://www.Libertarian-International.org

Posted by: RalphKSwanson | January 6, 2011 2:27 PM | Report abuse

In one corner you have Hong Kong and Singapore in the other Cuba and North Korea.

Posted by: jwogdn | January 6, 2011 4:25 PM | Report abuse

For information on what world Libertarians are doing, please see http://www.Libertarian-International.org

Posted by: RalphKSwanson | January 7, 2011 3:56 AM | Report abuse

I'd like to know exactly which laws liberals were proposing before the crash which would have prevented it. It's easy in hindsight to say, "We needed more regulation!" But unless you can point to an actual attempt to employ proper regulation which was thwarted by 'libertarian sentiment', you're just engaging in a logical fallacy.

The problem with the idea that there wasn't enough government regulation is that it presupposes that government had the knowledge and desire to implement the kind of regulations that would have prevented it. But as we all know, the regulators were fully with the program of lowering the cost of capital, incentivizing home ownership, lowering lending standards, and in general contributing to the problem.

Fannie and Freddie were major players in the mortgage securitization business, and helped legitimize it with their quasi-government status. The men responsible for the main oversight committees in the House and Senate were Barney Frank and Chris Dodd, and both were enthusiastic cheerleaders for everything that was happening, and in fact actively argued against the few people who were actually raising alarm bells.

So exactly where were these new magic regulations coming from? Who was pushing for them, and where is the documentation for us to see?

If government was just as blind as the market, then it hardly seems fair to blame the market and assume that more government would have fixed the problem.

Posted by: danhanson | January 7, 2011 2:46 PM | Report abuse

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