Targeted benefits, diffuse costs

Sven Wilson at Pileus does a great job of taking one of my favorite hobby horses out for a trot: he thinks one of the reasons ObamaCare has gotten in so much trouble with the public is that it violates “an ironclad law of redistributive politics,” namely the importance of providing targeted benefits to loyal political interests, while spreading the cost anonymously across the entire tax base.  This way, you get a group of happy beneficiaries who will eagerly vote to reward politicians for their “free” goodies (and later, when the whole thing turns sour, to protect their interests) without creating a corresponding group of grumpy taxpayers who resent covering the cost.  Santa’s sleigh flies best when the taxpaying reindeer wear blinders.

Wilson argues that ObamaCare, thanks to all those insurance cancellation letters and jacked-up premiums, made the fatal mistake of concentrating its costs and producing a backlash:

Vulnerable Democrats in Congress are starting to panic because they are seeing the consequences of violating the law of diffuse and concentrated interests.  Those insurance cancellation letters and the higher prices faced by a portion of those shopping on the exchange are a small portion of the population (probably less than one percent), but they are highly concentrated, not to mention vocal.

If you are, for example, a healthy young man running a small start-up business, you are likely to see your rates on the individual market go up considerably, especially if you are successful enough not to qualify for a subsidy.  Under ObamaCare, the transfers from the young to the old increase, as do transfers from men to women and from the healthy to the unhealthy.

I’ve remarked on this idea of concentrated benefits and diffuse costs often.  It seems increasingly important to the Left for its favored voting blocs to think the costs are virtually irrelevant.  The old model of socialism held that its money would be painlessly extracted from super-rich people, who barely notice a few extra gold coins getting pinched from their treasure vaults.  In the modern era – ramping up during the Bush years, especially after the Democrats took control of Congress – socialism claims that the money can be conjured from thin air with deficit spending.  Nobody has to to bear the diffuse burden.  

I suspect this new model became more popular because liberals sensed they were reaching the practical limits of class warfare, particularly since the previously bamboozled elements of the public were beginning to notice that top liberals and their good buddies in Hollywood tend to be extremely rich themselves.  Also, a critical number of voters don’t like thinking of themselves as the recipients of concentrated benefits looted from the great mass of taxpayers.  They want to focus on what they’re “entitled” to, not where it comes from.

It’s been a long time since any appreciable share of the general tax burden was appropriated for any specific purpose at all.  Locally, you might see property taxes raised for school funding, or a sales tax levied to fund some specific improvement, but in Washington they never say “we’re going to introduce this package of benefits, leading to the following tax increase,” even when the tax increase is supposedly levied against only the Evil Rich.  That’s not how tax increases are sold anymore.  The only rationale ever offered for a tax increase is deficit reduction.  Think back to all the tax-hike dramas of the Obama years – that’s the only reason Democrats ever give when they go on a tax binge.  They invariable pose as deficit hawks when they seek more revenue.  When they want to increase spending, they promise the money will flow from the magic printing presses of the Treasury, much as Finnish mythology holds that the ocean is salty because the Mill of the Gods is churning away somewhere in the depths.

It all boils down to a scam that inflicts tax increases as deficit time bombs, diffusing the costs even further than the old tax-and-spend liberalism did.  Tax-and-spend took an epic beating in the Eighties, and never really recovered.  It’s interesting to observe that ObamaCare cleared away the redistribution smokescreen just a little, and it was enough to make Americans recoil in horror from the clear look they got at punitive liberalism.  I wonder how much worse it will get when millions of people in the group market discover they’re next in line for a beating.


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