Ron Paul was in a debate with some guy who wanted government health-care. Ron tried to explain to him that the reason health care is so expensive is because of the government. Ron also talked about inflation (the increases in the money supply)making things more expensive, when Ron said inflation he meant the Austrian definition but the guy did not. Now the guy responded that inflation is not making it expensive because ‘‘health care costs are rising faster than the CPI.’’ But aren’t the CPI increases a direct result of the increases in the money supply ? So isn’t his response rather erroneous? He is suggesting because health care costs are rising faster than food and oil that inflation is not responsible. But he seems to forget that the higher food and oil prices are a result of the Fed’s policies. So isn’t his whole argument erroneous and based on a misguided understanding of inflation?
It is confusing because it lacks logic. The pro-government financing of health care by force crowd has this argument that amounts to the following:
Health care is expensive and increasing in price faster than the economy at large. So large numbers (how large is debatable) of people are having to either not get health care or are depending on the government for it. So the only solution to control this is through government force on the providers of the market. If government is the only customer, a monopsony, then government can use force to reduce the prices and thus allow everyone to buy health care.
There are serveral significant problems with the above argument. First, what is the mechanism government will use to control prices? The answer is two fold: 1. It will use brute force on providers by forcing them to take patients at their payment schedule. Of curse this creates shortages, think Canada, UK, Germany, etc. or 2. It will attempt to subsidize providers by stealing money from other areas of the economy. All socialized health care financing systems do this as well.
The second is what RP is challenging. That is in a free market determined money system, or at least in a commodity money system, inflation, the creation of new money and/or credit will be very low. So no matter how much government and the suppliers of health care try to increase prices, all they can do is divert resources away from other consumer preferences. Consumers will economize in one of two ways: 1. Consume less health care. Or 2. Consume less other stuff. Also keep in mind that even in a more free market than current (Suppliers do this in the current market at great cost to themselves and their customers:PATIENTS), suppliers will rush in to provide these services as the government-health care financing cartel jacks up prices.
CPI is (although biased) a weighted average of prices. I’m fairly certain that “health care” (whatever that means) is on the list, so the rising cost of health care contributes to an increase in CPI. To suggest, as this guy does, that because the price of X is not moving in lockstep with CPI, is patently retarded.