FAT CATS AND SIPPY CUPS

One recent strand in the debate over Obamacare has been the argument over the expense of the program. Though the President claims great savings will be realized by nationalizing this sector of the economy, the non-partisan Congressional Budget Office continues to peg the additional costs at around a trillion bucks over the next ten years. Other estimates are much higher and, of course, all of us know that government programs often cost many times the amount of the initial estimates.

Supporters of nationalization, while not directly addressing this criticism, have cited “obscene profits” currently being reaped by insurance executives, medical facilities, “Big Pharma,” and the like. Look at their millions in stock options and bonuses, we are told. Look at their corporate jets and lavish conventions! There are vast savings to be found simply by cutting these looters and brigands out of the healthcare loop. Obama himself has informed us that doctors who amputate feet and remove tonsils are often motivated to do so by greed alone.

All of which brings me to the sippy-cup aisle at Argus, which I discussed at some length in “Feeding The Maw” (here). In the American marketplace, there are more sippy cups than you can imagine, in different shapes, different sizes, different colors and different designs. There are sippy cups with screw-on tops and snap-on tops, and insulated sippy cups, and sippy cups with different sorts of handles, and sippy cups featuring cartoon characters and cute little animals and letters of the alphabet. Even Argus cannot possibly carry all the different varieties.

As I pointed out in that article, people on opposite ends of the political spectrum can have very different views of the profusion of sippy cups at Argus.

Personally, I regard them as a wondrous manifestation of the “invisible hand” of capitalism first described by Adam Smith. The only reason for the existence of, let’s say, a six ounce, powder-blue, Spongebob sippy cup with a snap-on lid is that there are people who want it. They want it enough to get in their cars, drive to Argus, take one off the shelf and pay money for it. And because these consumers exist, there is also going to be someone somewhere (or many people in many places), who will acquire the raw materials, fabricate them into the desired product, package it, advertise it, and ship it to Argus for sale. The process is entirely voluntary on all sides; in fact, the term “voluntary” makes it sound more willful than it is. It’s more of an autonomic process, like breathing, since it happens without anyone having to think about it or orchestrate it. And it occurs without sippy-cup czars or central planners or the approval of Nancy Pelosi.

For a liberal, however, the reaction is quite different. How many different sippy cups does America really need, they wonder. It’s ridiculous to have so many different designs and colors and shapes and decorations. Look at the inefficiencies and the waste of our resources! And look at all the sippy-cup executives with their $20 cigars and stock options and country clubs and corporate jets! Wouldn’t it be better for everyone if we cut the fat cats out of the system? Just think how much we could save.

It’s the classic Marxist analysis of the free market system, and the analysis is the same whether we’re talking about health care or sippy cups. It’s the people who invent things and make them and sell them, and become rich as a result, who are the problem. They are simply parasites, exploiting the poor schmo who works in the sippy-cup factory (or writes the health insurance policy), and getting wealthy by stealing bread from the mouths of the deserving poor. History, however, has shown us that there is no way other than capitalism to produce things that a) provide people with what they want, and b) create wealth.

There is a very simple reason for this. It’s because the incentives for businessmen and bureaucrats are completely different.

Though “profit” is a dirty word in the White House at the moment, it is only the allure of profit that gives someone the motivation to solve all the problems involved in making a product people desire at a price people will pay. It can’t be easy to make money in the sippy cup business, for example. For starters, barriers to entry are very low and the competition is fierce. In addition to finding a design that will catch the consumer’s eye, you will have to arrange all the details of manufacturing the item (probably in a foreign country), ensuring at all times that your product conforms to every clause and sub-paragraph of the 250 pages in the Code of Federal Regulations pertaining to “Things That Go In A Baby’s Mouth.” You will also have to reach an agreement with Spongebob’s snarling mob of entertainment lawyers (reputedly the meanest in Hollywood) for the rights to use his image. If you then succeed in transporting your sippy cups across thousands of miles of ocean, teeming with pirates, and your shipment is not stolen on an American dock by mobsters or destroyed by careless longshoremen, all you have to do is forge a marketing deal with Wal-Mart or Argus or Costco, none of which will pay you one single penny more than they absolutely have to and all of which will drop you like a white-hot anvil if your Spongebob cups don’t break all sippy cup sales records and excite infants to throw their Elmo cups out of car windows. In addition, you have probably done all this with money borrowed on the security of your other business and your house so that if you fail, you will lose everything you have worked for over the previous twenty years, including your wife, your girlfriend and your Labrador retriever.

A man like this is highly motivated to make the best possible product at the lowest possible price.

But the Sippy Cup Czar will have no such concerns. The desires of customers, for example, will hold little interest since he will preside over a monopoly that will give consumers no other option but to buy their cups from the government. It’s wrong even to call them “customers” or “consumers”---they will be “end-users,” a term we have all become familiar with, which describes the user of a product or service who has no market power in the transaction by which the product or service is acquired. And as we have all learned through bitter experience, if you are ever offered the choice of being an end-user or being waterboarded, the first thing you need to do is to put on your bathing suit.

The Sippy Cup Czar will not be a free agent, of course, and there will be a number of constituencies he will have to attend to. Congressmen, who will constitute his board of directors, will have many “suggestions” on the images that should appear on the cups (perhaps a picture commemorating the Stonewall riots?), the unionized factories that should produce them, the trucking outfits that should transport them, and so on. The Sierra Club will also bring pressure to bear on the Czar, perhaps relating to the carbon usage that the manufacture of sippy cups inevitably involves. One must assume that somewhere along the line, ACORN too will get a bone.

Cost and efficiency will not be an issue because it never is in a bureaucracy. Bureaucrats are not judged in that fashion. The clout of a government official is measured by the size of his budget and the number of people in his agency, which is why there is never even an attempt to save money. If, by accident, a bureaucrat fulfills his mission without spending his entire budget, his appropriation is cut for the next budget cycle and he loses prestige. It’s much safer to go slightly OVER your budget so you can claim you need a much larger number the following year. This is why government programs almost always cost more (and sometimes quite a bit more) than they were supposed to.

Given the results of central economic planning around the world, can there be any doubt what would happen if the government took over the sippy cup industry? There would be one kind of cup, perhaps in two colors, and there would probably be a picture of Rosa Parks on every one. From time to time, there would be an unexplained shortage, and the shelves would be empty for months. Half the cups would leak and occasionally, when little Johnny dropped one on the floor, it would explode. And each cup would cost $12.

Medicare (begun in 1966), now costs about thirteen times more, in real dollars, than it was supposed to. Bush’s Prescription Drug and Medicare Improvement Act of 2003 was supposed to cost $400 billion over its first ten years. It costs at least twice that today (it’s difficult to get accurate figures on this), and in its second decade, the program’s costs will quadruple.

Obamacare will be no different, and the CBO’s projected cost of $1 trillion over the next ten years will turn out to be woefully low. The idea that the government can do anything more cheaply than the private sector is absurd, and the claim that vast savings will be obtained by taking away a few jets and spa retreats from evil fat cats is simply a disgraceful appeal to class hatred.

Copyright2009MichaelKubacki