Wednesday, February 10 , 2016, 11:17 am | Fair 75º

Michael Barone: When Government Offers to Help, It Often Makes a Mess

By Michael Barone | @MichaelBarone |

There’s a natural human impulse to help people who need a hand. In the political world, that often translates to an impulse to have government help people who need a hand. Who wants to argue with that?

But experience tells us that it’s not always easy to help. Individuals’ good intentions go awry. Government programs sometimes produce unintended consequences that make things worse for the intended beneficiaries.

Consider what could be called the three Hs: health care, housing and higher education.

Over the last generation and more, government has stepped in to help ordinary individuals and those with special problems on all three issues. The results have been, well, not as good as intended.

Take health care. Just about every health-care expert from right to left believes that government’s first real foray into the field has been counterproductive.

That was the decision, made during World War II, when defense contractors were looking desperately for workers but were barred from raising wages, that the cost of health insurance policies would be deductible for employers and not taxable to employees.

Seven decades later, that’s still the law. People whose employers provide health insurance effectively pay less for it than people whose employers don’t.

And those with employer-provided health insurance tend to be insulated from knowledge of the costs of treatment. That’s one of the things pushing health care costs up more rapidly than inflation.

In contrast, prices of health-care procedures not covered by insurance — Lasik eye surgery, cosmetic surgery — have been falling because of technological advance and free-market competition.

Government’s efforts to help people — military contractors and their employees — created a mess.

Then there’s housing. For more than two decades, government policies have tried to make it easier for modest-income people, especially racial minorities, to get mortgages to buy houses. Both the Clinton and Bush administrations pushed this hard.

They were aided and abetted by the government-sponsored entities Fannie Mae and Freddie Mac, whose willingness to buy up such mortgages and sell them to investors pushed literally trillions of dollars into the housing market.

But this housing bubble burst when prices unexpectedly dropped and Fannie’s and Freddie’s mortgage-backed securities suddenly became unsaleable. This was the proximate cause of the financial crisis of 2008 that sent the economy into recession and created the new normal of slow growth.

Meanwhile, thousands of new homeowners, a large proportion of them Hispanic and black, faced foreclosure and eviction. Government’s efforts to help people — especially minorities with subpar credit — created a mess.

Finally the third H, higher education. Going back three decades, government has subsidized college loans in a way that has pumped money into the nation’s colleges and universities. The argument was that college degrees enabled people to make better livings and that government should help everyone who wanted one.

But as government pumped more and more money in, institutions have been raising tuitions and fees faster than inflation for three decades. That leaves college unaffordable for almost every family without government-encouraged loans.

The result has been administrative bloat — colleges and universities have had more administrators than teachers since 2005 — and students with college loan debt that can’t be discharged in bankruptcy.

Many students leave school without degrees but with plenty of debt. Many who do earn degrees do so in subjects that, in our sluggish new normal economy, don’t lead to jobs after graduation.

But the debts remain and can build up for a lifetime. Government’s efforts to help people — young people seeking a college education — have produced a mess.

Not all policies attempting to help people produce such results. The G.I. Bill of Rights providing higher-education benefits and housing loans after World War II worked because it rewarded not only past service but also strenuous effort.

The original FHA home mortgage program worked well because it limited loans to those with good credit ratings.

But policies trying to extend the benefits of health insurance, housing and higher education that tended to sever the connection between effort and reward have backfired and hurt many of the intended beneficiaries.

Government policymakers failed to anticipate the responses of third parties attempting to game the system and grab some of the money government was making available.

The impulse to help those in need is one of mankind’s better traits. But the impulse to have government help them is often self-defeating.

Michael Barone is a senior political analyst for The Washington Examiner, a resident fellow at the American Enterprise Institute, a Fox News Channel contributor and a co-author of The Almanac of American Politics. Click here to contact him. Follow him on Twitter: @MichaelBarone.

» on 01.03.13 @ 05:27 PM

Barone’s erudite flights of rhetoric read well, but often make no sense, if you pause to think about them.

Does federal action ever get anything right, or cost effectively?

What about when Teddy Roosevelt energized the Pure Food and Medicine Act, that the FDA runs, to assure all of us that all food and medicine sold here are properly prepared, shipped, stored, and reflect what’s on the label?

What about when he reorganized public lands into the modern National Park,
National Monument, and National Forest systems, at a time when developers
and miners had their eyes on Bryce, Zion, the Grand Canyon?

What about when he and Woodrow Wilson forged the modern Federal Reserve
System, to set minimum, prudent national standards for all banking?

What about FDR’s creation of what became the FDIC, the FTC, the SEC, to protect
depositors and investors after the Great Crash?

What about his creation of Social Security 75 years ago, as a safety net for retired workers and their families?

What about NATO, the Marshall Plan, the GI bill, under Truman?

What about federal support for civil rights and integration, under Truman, Ike,

What about the Peace Corps and the roots of Americorps?

What about Medicare?

What about federal investment in R&D, which led to the Internet, remote sensing,
lasers, and a thousand essential products entrepreneurs have put into everyday

Are federal bureaucracies always the best way to improve or solve complex
socio-economic or resource issues?

Of course not. Neither are bloated, short-sighted corporate or venture-cap
bureaucracies, either.

So be careful how federal power intrudes on other aspects of modern life. But
please don’t set it up as some kind of mindless, ideological bogeyman, either.

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