Socialism, American Style, Part 3

Jacob G. Hornberger – October 22, 2020

[Read Part 1 | Part 2]  

I grew up in the poorest city in the United States. At least, that is what the Census Bureau told us back in the 1950s and 1960s about my hometown of Laredo, Texas, which is situated on the U.S.-Mexico border in South Texas. Some people in the southern part of the city literally lived in shacks.

As poor as Laredo was, it didn’t come close to matching economic conditions in Nuevo Laredo, which was just across the Rio Grande, which constitutes the U.S.-Mexico border in Texas. The first time that I went into Nuevo Laredo as a child, I was absolutely shocked at the level of poverty on that side of the river.

Doctors’ offices in Laredo were regularly filled with people, some of whom were from Nuevo Laredo. Laredo doctors knew that many of their patients were unable to pay them. Nonetheless, I never heard of one instance where any doctor turned a patient away for inability to pay. They helped poor people with free medical treatment, on a purely voluntary basis.

Why did the doctors provide free medical care to the poor? Because they wanted to. Because they thought it was their ethical and moral duty to do so. They had chosen a profession whose aim is to heal people. They were not about to let a person’s poverty interfere with fulfilling that aim.

Even though they were treating lots of people for free, Laredo doctors were still among the wealthiest people in town, second only to people on whose land oil had been discovered. Moreover, since America’s welfare-warfare state way of life was still in its early stages, income taxes were relatively low, enabling doctors to keep a large portion of their income from those who were paying for their services. Doctors were doing well financially and were choosing to “give back” to the community by helping the poor with free medical services.

It was much the same with Mercy Hospital, which was the only hospital in town. It was a Catholic hospital. It charged for its services but it also treated patients who couldn’t afford to pay. How was it able to do that and stay in business? Through donations. The wealthier people in town made donations to the hospital, on a purely voluntary basis, to subsidize its operations.

What was extraordinary was the cost of health care. Hardly anyone had medical insurance, because they didn’t need it. Health-care costs were so low and stable that going to the doctor was like going to the grocery store. How many people have grocery-store insurance to protect themselves against the soaring price of groceries? No one. That’s because grocery-store prices are low and stable.

In fact, I doubt whether doctors even had a billing system, one in which they treated patients and then sent them a bill. Why engage in such a costly process when the doctor could just handle patients on a cash basis? Moreover, they knew that often patients who had not been able to pay would later thank them with gifts such as delicious tamales or arroz con pollo.

Doctors loved what they did in life. Many of them in Laredo even made house calls or let people come to their homes for treatment. Sometimes when someone in our family needed, say, a tetanus shot on a weekend, my father would call our family physician and he’d say, “Just come on by the house.” We’d pull up to his house and he’d come out and give the shot to us in his front yard.

Medical innovations and inventions were proliferating and raising the overall standard of health care in America.

Then along came Medicare and Medicaid in the 1960s, during the presidential regime of Lyndon Johnson, who had been a political protégé of Franklin Roosevelt, the man who had converted America into a welfare state some 30 years before.

Medicare and Medicaid destroyed what had been the finest health-care system in history. Like Social Security, the idea of government-provided health care for people originated among socialists in Germany in the late 1800s. The idea was imported into the United States by American progressives, who began promoting it during the first half of the 20th century.

Medicare and Medicaid were based on the same welfare-state philosophy as that of Social Security — that it is the responsibility of government to take care of people by providing them with their retirement, health care, education, clothing, food, housing, and other essential items.

The purpose of Medicare was to provide free or deeply discounted health care to seniors. The purpose of Medicaid was to provide the same to poor people.

One important thing to keep in mind is that neither of these programs was necessary, because the health-care needs of the elderly and the poor were already being met voluntarily by doctors, hospitals, and other health-care providers.

What these two socialist programs did was put an enormous government-driven demand onto America’s health-care system. When a government program does that, the result is predictable: ever-increasing health-care costs.

Gone were the days of low and stable health-care costs. That’s when the need for major-medical insurance arose. People needed the insurance protection against going bankrupt from exorbitant healthcare costs.

At the same time, doctors began feeling the need to form themselves into all sorts of contorted associations with other doctors, hospitals, and medical groups. An ever-increasing number of doctors began hating what they did in life and retired early.

Prior to the enactment of Medicare and Medicaid, U.S. officials had provided an income-tax incentive for employers to purchase medical insurance for their employees. That had a stultifying effect on economic conditions and adversely affected people because they would lose their medical insurance if they left their jobs. The problem was aggravated by the fact that if they were able to procure other medical insurance, it might not cover conditions that their current employer-provided medical insurance covered.

A dynamic economy necessarily entails a constant shifting of people in employment. People go from lower-paying jobs to higher-paying ones. That’s one of the main reasons that Europe has always had stultified economies: countless rules and regulations that “protect” workers have had a paralyzing effect on economic vitality. That’s what the government’s income-tax manipulation for employer-based medical insurance tended to do in the United States.

As with Social Security, Medicare and Medicaid are funded by taxation on income. There is nothing voluntary about taxation. Refuse to pay your income taxes, and the Internal Revenue Service will come after you with a vengeance, especially if you publicize it. They will seize your assets, garnish your bank accounts, levy liens on your real estate, and harass you to no end. And then they will persuade the Justice Department to secure a criminal indictment against you, prosecute you, convict you, incarcerate you, and fine you. All because you refused to pay your income taxes.

Thus, it is supremely ironic when people criticize us libertarians for wanting to abolish welfare-state programs. They say that our position demonstrates our lack of compassion and care for others.

But their “compassion” is a vicarious one — one that that comes from the gun of the government. After all, don’t forget: If a person resists those garnishments, liens, arrests, or incarcerations with deadly force, they will kill him. They will call it “resisting arrest” but the person will still be dead for refusing to pay the taxes that fund socialist programs.

The only genuine compassion is one that comes from the willing heart of the individual, not one that comes from the force of government. What doctors did in Laredo — and, indeed, all across America before the enactment of Medicare and Medicaid — is what genuine compassion is all about. The “compassion” that comes with Medicare, Medicaid, and the IRS is a false compassion — the false compassion of socialism.


With the enactment of Medicare and Medicaid, America has had a decades-long, ever-growing, never-ending, perpetual health-care crisis. To address the crisis, the federal government has adopted an ever-increasing array of health-care “reforms.”

None of them has worked to resolve the crisis. The most recent example of major health-care reform was the Affordable Care Act, or Obamacare. It was intended to end America’s health-care crisis once and for all. It didn’t. Instead, it just caused the crisis to get worse, which has motivated welfare-state proponents to advocate a full federal takeover of health care, just as in Cuba, North Korea, and other socialist nations.

In 1994, The Future of Freedom Foundation published its first book, a little volume entitled The Dangers of Socialized Medicine. It consisted of essays that FFF had published during the first three years of its existence. It can still be purchased on Amazon. It is as timely today as it was back then.

As we have been saying for 30 years, there is but one solution to America’s health-care morass. There is no other solution. Only one. That solution is a total free-market health-care system, one that entails the complete separation of health care and the state. That necessarily means the repeal, not the reform, of Medicare and Medicaid.

I repeat: There is no other solution. Medicare and Medicaid are cancerous tumors on the body politic. To save the patient from this cancer, only radical surgery removing the tumor will do. Any attempt to modify, reform, fix, or improve the tumor will do no good at all.

For the past 30 years, there have been people in the libertarian movement who have given up on the idea of health-care freedom. They threw in the towel decades ago and decided that Medicare and Medicaid were a permanent part of America’s political system. They decided to simply accept what they considered was inevitable and have devoted their efforts ever since to reforming, not repealing, Medicare and Medicaid. Among their most popular proposals for health-care reform are what they call “health savings accounts.”

They are wasting their time, money, and energy. What they don’t understand is that America’s socialized health-care system is not broken, as the mainstream press often asserts. Instead, it is inherently defective. Something that is broken can conceivably be fixed. Something that is inherently defective cannot be fixed, not even by libertarian health-care reformers.

Today, the federal government seizes around $2 trillion from the income of younger people to fund Social Security, Medicare, and Medicaid. Lots of younger people don’t realize that because they don’t pay much attention to the amount of money that their employers withhold from their income. They focus only on their net income — their “take-home” pay.

Why not leave that $2 trillion in the hands of younger people and cut out the middleman? Why not let younger people give that money to their parents and grandparents and other people in need? Why not entrust them with the freedom to do the right thing voluntarily rather than entrust government with the power to force them to do the right thing?

It’s because the American people have lost faith in themselves, in others, in free markets, in free will, and in God. They have come to view the federal government as their political parent or, even worse, their god. That’s what socialism does. It is a destructive political narcotic that causes people to have a mindset of dependency on the government and its coercive apparatus.

Central Planning

There is another aspect of America’s federal health-care system that needs to be addressed, one that has clearly manifested itself during the coronavirus crisis. The system is based on central planning, which is a core feature of the socialist paradigm. The economic system of the Soviet Union, for example, was based on central planning, which was why there were always widespread shortages and other economic chaos in that socialist system.

The Centers for Disease Control (CDC). The Food and Drug Administration. A governmental task force on the coronavirus crisis. The Department of Health and Human Services. And others. They all constitute a top-down, command-and-control system run by central planners within the federal government.

That’s why there is massive health-care dysfunction within the federal government. It’s because of America’s health-care system of central planning. That’s why there are shortages of masks, ventilators, and testing kits. That’s why there are defective testing kits sent out to people by the CDC. That’s why federal officials have been running around like chickens with their heads cut off.

That’s what happens under a system of central planning. Just ask people who lived in the Soviet Union. The economist Ludwig von Mises called a system of central planning “planned chaos.” What better term to describe America’s health-care system during this crisis?

When the system fails to work, the results are predictable — tyranny and oppression. Mandatory lockdowns and shutdowns of the entire economy. Arrests. Criminal prosecutions. Just as in the Soviet Union.

The opposite of a centrally planned system is a free-market system. Abolish the CDC, the FDA, the health-care task force, the Department of Health and Human Services, and all other federal departments and agencies that deal with health care. Get rid of them all, along with all the federal programs, laws, regulations, and agencies that deal with health care. Separate health care and the state, the same way that our ancestors wisely separated church and state. Leave threats to our health to the healthcare industry. Let them, not the politicians and bureaucrats, lead us out of these types of crises.

There is only [one] way out of America’s health-care morass — our heritage of liberty and free markets. The sooner we embrace that heritage, the freer and healthier we will be.

[Part 4 to be published]

Reprinted from The Future of Freedom Foundation. Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at and from Full Context.

Image credit: Wikimedia

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