No Tooth Fairy Either
December 12, 2011 6 Comments
As far as I can tell, in this post on long-term-care insurance, James Kwak goes to great lengths to lament that there is no insurance product offered by the market that will insure him against literally all conceivably financial risks related to aging, indefinitely, for the rest of his life. He has dug into it and discovered, shockingly, that there’s no natural market actor out there taking the other side of the ‘make geriatric James Kwak’s financial existence perfectly risk-free’ trade.
But it’s a thing James Kwak wants! Market failure! Gotta use government!
Now to be fair, Kwak does point out (and analyze, again, at great length) that there are very natural and understandable reasons why an insurance company wouldn’t and couldn’t credibly promise to Pay For Your Long-Term Care, Whatever That Might Mean (And Cost), For However Long You Might Live. The problem is, he doesn’t seem to apply the same logic and common sense to the government:
The government can offer unlimited coverage and real inflation protection (benefits based on actual costs at the time you incur them) because it has the ability to absorb long-term financial risks. It can mandate universal coverage, eliminating adverse selection. Because it can raise premiums (or other taxes), it will not go out of business.
Golly! Can the government give us each a baby unicorn as well?
The interesting thing about this argument is that it’s basically just an argument for socialism. The government can offer [whatever], and can mandate [whatever's needed to 'give' us the whatever], and it will not go out of business [because it can grab whatever] from us. What socialist program is that not an argument for?
Take a gander at Europe’s finances. Hell, take a gander at the U.S.’s finances. Where exactly has this attitude (=that ‘the government’ can magically insure, and create open-ended defined-benefit promises for, everything our hearts desire, because it ‘will not go out of business’ due to the ability to tax/inflate) gotten us? How far do things have to get before we stop being taken in by the puerile analyses of people like James Kwak?